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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">UNITED STATES</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">SECURITIES AND EXCHANGE
COMMISSION</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Washington,
D.C. 20549</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">FORM&#160;10-Q</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline;" face="Wingdings">x</font> QUARTERLY REPORT
PURSUANT TO SECTION&#160;13 OR 15(d)&#160;OF THE</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">SECURITIES
EXCHANGE ACT OF 1934</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 2007</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">OR</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline;" face="Wingdings">o</font> TRANSITION REPORT
PURSUANT TO SECTION&#160;13 OR 15(d) OF THE</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">SECURITIES
EXCHANGE ACT OF 1934</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">FOR
THE TRANSITION PERIOD FROM
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
TO&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Commission
file number 1-8359</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NEW JERSEY RESOURCES
CORPORATION</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">(Exact
name of registrant as specified in its charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New
    Jersey</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">22-2376465</font></font></div>
            </td>
          </tr>
          <tr>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(State
      or other jurisdiction of</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">incorporation
      or organization)</font></div>
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(I.R.S.
      Employer</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Identification
      Number)</font></div>
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          <tr>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="38%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">1415 Wyckoff Road, Wall, New
      Jersey 07719</font></font></div>
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">732-938-1480</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(Address
      of principal</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">executive
      offices)</font></div>
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(Registrant&#8217;s
      telephone number,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">including
      area code)</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="78%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Securities
      registered pursuant to Section&#160;12 (b)&#160;of the
  Act:</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Common Stock - $2.50 Par
      Value</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New York Stock
      Exchange</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(Title
      of each class)</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(Name
      of each exchange on which
registered)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Indicate
by check mark whether the registrant (1)&#160;has filed all reports required to
be filed by Section&#160;13 or 15 (d)&#160;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)&#160;has been subject to
such filing requirements for the past 90 days.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Yes:&#160;<font style="DISPLAY: inline;" face="Wingdings">x</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;No:&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of &#8220;accelerated
filer and large accelerated filer&#8221; in Rule&#160;12b-2 of the Exchange Act.
(Check one):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Large accelerated filer:&#160;<font style="DISPLAY: inline;" face="Wingdings">x</font>&#160;&#160;&#160;&#160;&#160;Accelerated
filer:&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font>&#160;&#160;&#160;&#160;&#160;Non-accelerated
filer:&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Yes:&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;No:&#160;<font style="DISPLAY: inline;" face="Wingdings">x</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
number of shares outstanding of $2.50 par value Common Stock as of February 5,
2008 <font style="DISPLAY: inline; FONT-SIZE: 8pt">was
27,890,722.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div><br></div>
    <div>
      <hr style="MARGIN-TOP: -5px; COLOR: #000000" noshade size="1">
      <hr style="MARGIN-TOP: -13px; COLOR: #000000" noshade size="4">
    </div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
        </div><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part I</font></div>
    </div>
    <div><br></div>
    <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font size="5">New Jersey Resources
Corporation</font></font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="TOC">TAB</a>LE OF
CONTENTS</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="right" colspan="5" valign="top" width="77%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Page</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" colspan="4" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#flookon">Information Concerning Forward-Looking
      Statements&#160;&#160;&#160;&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="4" valign="top" width="74%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" colspan="4" valign="top" width="74%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#fininfo">PART&#160;I
      &#8211; FINANCIAL INFORMATION</a></font></font></div>
            </td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#item1">ITEM
      1.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#item1">Financial
      Statements&#160;&#160;&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="2" valign="top" width="15%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" colspan="2" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#notes">Notes to Condensed Unaudited Consolidated Financial
      Statements</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">6</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#gener">Note 1&#160;&#160;&#160;&#160;General</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">6</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#reg">Note 2&#160;&#160;&#160;&#160;Regulation</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#deriv">Note 3&#160;&#160;&#160;&#160;Derivative
      Instruments</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">11</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#invest">Note 4&#160;&#160;&#160;&#160;Investments In Equity
      Investees</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">12</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#eps">Note 5&#160;&#160;&#160;&#160;Earnings Per
      Share</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">13</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#dbt">Note 6&#160;&#160;&#160;&#160;Debt</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">14</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#cap">Note 7&#160;&#160;&#160;&#160;Capitalized Financing Costs And
      Deferred Interest</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">15</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#stock">Note 8&#160;&#160;&#160;&#160;Stock-Based
      Compensation</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">16</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#emplo">Note 9&#160;&#160;&#160;&#160;Employee Benefit
      Plans</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">16</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#aro">Note 10&#160;&#160;Asset Retirement
      Obligations</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">17</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#adpoy">Note 11&#160;&#160;Adoption Of Fin 48</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">17</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#comm">Note 12&#160;&#160;Commitments And Contingent
      Liabilities</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">18</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#bus">Note 13&#160;&#160;Business Segment Data</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">20</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#other">Note 14&#160;&#160;Other</a></font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#mda">ITEM
      2.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#mda">Management&#8217;s Discussion and Analysis of Financial
      Condition and Results of&#160;Operations for the Three Months Ended
      December 31, 2007</a></font></div>
            </td>
            <td align="right" valign="bottom" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#QQ">ITEM
      3.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#QQ">Quantitative and Qualitative Disclosures About Market
      Risk&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">41</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#cont">ITEM
      4.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#cont">Controls and
      Procedures&#160;&#160;&#160;&#160;&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">44</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="4" valign="top" width="74%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" colspan="4" valign="top" width="74%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#pat2">PART&#160;II &#8211;
      OTHER INFORMATION</a></font></font></div>
            </td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#legal">ITEM
      1.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#legal">Legal
      Proceedings&#160;&#160;&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="bottom" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">46</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#risk">ITEM
      1A.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#risk">Risk
      Factors&#160;&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">46</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#unreg">ITEM
      2.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#unreg">Unregistered Sale of Equity Securities and Use of
      Proceeds&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">46</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#subm">ITEM
      4.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#subm">Submission of Matters to a Vote of Security
      Holders&#160;&#160;</a>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">47</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a href="#exh">ITEM
      6.</a></font></font></div>
            </td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#exh">Exhibits</a></font></div>
            </td>
            <td align="right" valign="bottom" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">48</font></div>
            </td>
          </tr>
          <tr>
            <td colspan="4" valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="top" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" colspan="3" valign="top" width="61%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><a href="#sig">Signatures</a></font></div>
            </td>
            <td align="right" valign="bottom" width="3%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">49</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">
        <div id="FTR">
          <div id="GLFTR" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font size="5">New Jersey Resources
Corporation</font></font></div>
    <div style="TEXT-ALIGN: center">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="flookon">INFO</a>RMATION
      CONCERNING FORWARD-LOOKING STATEMENTS</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Certain
statements contained in this report, including, without limitation, statements
as to management expectations and beliefs presented in Part I, Item 2.
&#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of
Operations,&#8221; Part I, Item 3. &#8220;Quantitative and Qualitative Disclosures about
Market Risk,&#8221; Part II, Item I. &#8220;Legal Proceedings&#8221; and in the notes to the
financial statements are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements can
also be identified by the use of forward-looking terminology such as &#8220;may,&#8221;
&#8220;intend,&#8221; &#8220;expect,&#8221; &#8220;believe&#8221; or &#8220;continue&#8221; or comparable terminology and are
made based upon management&#8217;s expectations and beliefs concerning future
developments and their potential effect upon New Jersey Resources Corporation
(NJR or the Company). There can be no assurance that future developments will be
in accordance with management&#8217;s expectations or that the effect of future
developments on the Company will be those anticipated by
management.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 10pt">The Company cautions readers that the
assumptions that form the basis for forward-looking statements regarding</font>
customer growth, customer usage, financial condition, results of operations,
cash flows, capital requirements, market risk and other matters for fiscal 2008
and thereafter include many factors that are beyond the Company&#8217;s ability to
control or estimate precisely, such as estimates of future market conditions,
the behavior of other market participants and changes in the debt and equity
capital markets. The factors that could cause actual results to differ
materially from NJR&#8217;s expectations include, but are not limited to, those
discussed in Risk Factors in Item 1A, as well as the following:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">weather
      and economic conditions;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">demographic
      changes in the New Jersey Natural Gas (NJNG) service
      territory;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      rate of NJNG customer growth;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">volatility
      of natural gas commodity prices and its impact on customer usage, NJR
      Energy Services&#8217; (NJRES) operations and on the Company&#8217;s risk management
      efforts;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">changes
      in rating agency requirements and/or credit ratings and their effect on
      availability and cost of capital to the Company;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">commercial
      and wholesale credit risks, including creditworthiness of customers and
      counterparties;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      ability to obtain governmental approvals and/or financing for the
      construction, development and operation of certain non-regulated energy
      investments;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">risks
      associated with the management of the Company&#8217;s joint ventures and
      partnerships;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      impact of governmental regulation (including the regulation of
      rates);</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">fluctuations
      in energy-related commodity prices;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">conversion
      activity and other marketing efforts;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">actual
      energy usage of NJNG&#8217;s customers;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      pace of deregulation of retail gas markets;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">access
      to adequate supplies of natural gas;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      regulatory and pricing policies of federal and state regulatory
      agencies;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      ultimate outcome of pending regulatory proceedings, in particular, the
      base rate case filing;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">changes
      due to legislation at the federal and state level;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      availability of an adequate number of appropriate counterparties in the
      wholesale energy trading market;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">sufficient
      liquidity in the wholesale energy trading market and continued access to
      the capital markets;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      disallowance of recovery of environmental-related expenditures and other
      regulatory changes;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">environmental-related
      and other litigation and other uncertainties;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">the
      effects and impacts of inflation on NJR and its subsidiaries
      operations;</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">change
      in accounting pronouncements issued by the appropriate standard setting
      bodies; and</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">terrorist
      attacks or threatened attacks on energy facilities or unrelated energy
      companies.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">While
the Company periodically reassesses material trends and uncertainties affecting
the Company&#8217;s results of operations and financial condition in connection with
its preparation of management&#8217;s discussion and analysis of results of operations
and financial condition contained in its Quarterly and Annual Reports, the
Company does not, by including this statement, assume any obligation to review
or revise any particular forward-looking statement referenced herein in light of
future events.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">1</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="item1">ITEM 1</a>.
      FINANCIAL STATEMENTS</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="fininfo">CO</a>NDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)</font></font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="58%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December&#160;31,</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands,&#160;except&#160;per&#160;share&#160;data)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="58%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">As Restated</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(See Note
    1)</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="58%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">OPERATING
      REVENUES</font></font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$811,138</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;737,401</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="58%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">OPERATING
      EXPENSES</font></font></div>
            </td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
      purchases</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">684,694</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">621,935</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operation
      and maintenance</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">32,179</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">28,316</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
      rider expenses</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">12,165</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">9,466</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Depreciation
      and amortization</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">9,403</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,902</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
      and other taxes</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">18,160</font></font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">13,952</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      operating expenses</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">756,601</font></font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">682,571</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">OPERATING
      INCOME</font></font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">54,537</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">54,830</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      income</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">1,528</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,296</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Interest
      charges, net</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">7,810</font></font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">7,875</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">INCOME BEFORE INCOME TAXES AND
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            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">48,255</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">48,251</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Income
      tax provision</font></div>
            </td>
            <td align="right" valign="top" width="9%">
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          <tr bgcolor="white">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Equity
      in earnings of affiliates, net of tax</font></div>
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            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">417</font></div>
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            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NET
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            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$29,434</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="58%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">EARNINGS PER COMMON
      SHARE</font></font></div>
            </td>
            <td valign="top" width="9%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">BASIC</font></font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.09</font></font></div>
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            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$1.06</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">DILUTED</font></font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.08</font></font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$1.05</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">DIVIDENDS PER COMMON
      SHARE</font></font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.40</font></font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$0.38</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">WEIGHTED AVERAGE SHARES
      OUTSTANDING</font></font></div>
            </td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">BASIC</font></font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">27,785</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">27,713</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">DILUTED</font></font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">27,952</font></font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">27,904</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="58%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">PRO-FORMA EARNINGS PER COMMON
      SHARE (See Note 5)</font></font></div>
            </td>
            <td valign="top" width="9%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="9%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="58%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">BASIC</font></font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.72</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$0.71</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="58%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">DILUTED</font></font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.72</font></font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 4px double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$0.70</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">See
Notes to Condensed Unaudited Consolidated Financial Statements</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">2</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 1. FINANCIAL STATEMENTS
      (Continued)</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-SIZE: 10pt">CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS </font>(Unaudited)</font></font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="19%">
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      Ended</font></font></div>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CASH FLOWS FROM OPERATING
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Adjustments to reconcile net
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Depreciation
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">8,977</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Allowance
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(373</font></font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Deferred
      income taxes</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">8,549</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2,842</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Manufactured
      gas plant remediation costs</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(4,041</font></font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(4,235</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Equity
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Cost
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
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            </td>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CASH FLOWS FROM FINANCING
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Proceeds
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">4,976</font></div>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Tax
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Proceeds
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Payments
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Purchases
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="72%">
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            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Investments
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            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Inventories</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Underrecovered
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="72%">
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            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Restricted
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">5,875</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Customers&#8217;
      credit balances and deposits</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">7,299</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(10,029</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      current assets</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(10,604</font></font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">864</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="PADDING-BOTTOM: 2px; BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 48pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(57,844</font></font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(14,579</font></td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">SUPPLEMENTAL DISCLOSURES OF
      CASH FLOWS INFORMATION</font></font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Cash
      paid for</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Interest
      (net of amounts capitalized)</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">6,434</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">7,599</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Income
      taxes</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2,661</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">8,000</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">See
Notes to Condensed Unaudited Consolidated Financial Statements</font></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">&#160;</div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">3</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 1. FINANCIAL STATEMENTS
      (Continued)</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ASSETS</font></font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="692"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="45"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="100">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December&#160;31,</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
            <td valign="bottom" width="37"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="91">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September
      30,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="692" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="45" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="100" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
            <td valign="bottom" width="37" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="91" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="692"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="45"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="73"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="27"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="37"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="66"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="25"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="692">
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            <td align="right" valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.25pt solid">
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            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
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            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="right" valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NONCURRENT
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            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Investments
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="7%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">86,743</font></div>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="7%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">312,369</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Derivatives,
      at fair value</font></div>
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="7%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">44,306</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Restricted
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4,200</font></font></div>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">4,200</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">12,779</font></font></div>
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            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">12,390</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      noncurrent assets</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">451,926</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">460,008</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 48pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      assets</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2,367,755</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2,230,745</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">See
Notes to Condensed Unaudited Consolidated Financial Statements</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">4</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 1. FINANCIAL STATEMENTS
      (Continued)</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CAPITALIZATION AND
LIABILITIES</font></font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="692"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="45"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="100">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December&#160;31,</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
            <td valign="bottom" width="37"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="91">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September
      30,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="692" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="45" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="100" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
            <td valign="bottom" width="37" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="91" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="692"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="45"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="69"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="31"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="37"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="64"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="27"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
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              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
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            <td valign="bottom" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CURRENT
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            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Current
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Short-term
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Accounts
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Dividends
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Deferred
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            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NONCURRENT
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Deferred
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Deferred
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Manufactured
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Postemployment
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">25,743</font></div>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">61,270</font></div>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">New
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">3,992</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Asset
      retirement obligation</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">24,068</font></font></div>
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            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">23,895</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">8,179</font></font></div>
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            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">7,596</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      noncurrent liabilities</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">501,088</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">499,498</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      capitalization and liabilities</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2,367,755</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2,230,745</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">See
Notes to Condensed Unaudited Consolidated Financial Statements</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">5</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="notes">NOT</a>ES TO
      CONDENSED UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">1.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="gener">GE</a>NERAL</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
condensed consolidated financial statements have been prepared without audit, as
of December 31, 2007 and for three months ended December 31, 2007 and 2006,
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). The September 30, 2007 balance sheet data is derived from the audited
financial statements of New Jersey Resources Corporation (NJR or the Company).
These condensed consolidated financial statements should be read in conjunction
with the financial statements and the notes thereto included in NJR&#8217;s 2007
Annual Report on Form 10-K.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
condensed consolidated financial statements include the accounts of NJR and its
subsidiaries, New Jersey Natural Gas (NJNG), NJR Energy Services (NJRES), NJR
Retail Holdings (Retail Holdings), NJR Energy Investment (NJREI) and NJR Service
Company (NJR Service). Intercompany transactions and accounts have been
eliminated. Retail Holdings&#8217; two principal subsidiaries are NJR Home Services
(NJRHS) and Commercial Realty&#160;&amp; Resources (CR&amp;R). NJREI&#8217;s primary
subsidiaries are NJR Energy and NJR Steckman Ridge Storage Company. NJR Energy
invests primarily in energy-related ventures through its subsidiary, NJNR
Pipeline (Pipeline), which holds the Company&#8217;s 5.53 percent ownership interest
in Iroquois Gas and Transmission System, L.P. (Iroquois). NJR Steckman Ridge
Storage Company holds the Company&#8217;s 50 percent combined interest in Steckman
Ridge GP, LLC and Steckman Ridge, LP (collectively, Steckman Ridge), a natural
gas storage facility that was acquired and is being developed with a partner in
western Pennsylvania.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
the opinion of management, the information furnished reflects all adjustments
necessary for a fair presentation of the results of the interim periods. Because
of the seasonal nature of NJR&#8217;s utility and wholesale energy services
operations, in addition to other factors, the financial results for the interim
periods presented are not indicative of the results that are to be expected for
the fiscal year ending September 30, 2008.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Current
Assets</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 16pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Included
in Other current assets is $2.6 million of restricted cash related to NJNG
natural gas purchases.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">New Accounting
Standards</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Recently Adopted</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation
No. 48, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for
Uncertainty in Income Taxes </font>(FIN 48), which alters the framework for
recognizing income tax contingencies. Previously, under Statement of Financial
Accounting Standards (SFAS) No. 5, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Contingencies</font>,
the focus was on the subsequent liability recognition for estimated losses from
tax contingencies where such losses were probable and the related amounts could
be reasonably estimated. Under this new interpretation, a contingent tax asset
(i.e., an uncertain tax position) may only be recognized if it is more likely
than not that it will ultimately be sustained upon audit. The Company adopted
FIN 48 on October 1, 2007. The Company has evaluated its tax positions for all
jurisdictions and all years for which the statute of limitations remains open
and in accordance with the provisions of FIN 48, recorded an additional
liability for unrecognized tax benefits and interest of approximately $4.3
million&#160;and an increase in retained earnings as of October 1, 2007 of
approximately $1.2 million.. For additional information on the effect of
adoption, see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 11.
Adoption</font>&#160;<font style="DISPLAY: inline; FONT-STYLE: italic">of FIN
48</font>.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Not Yet Adopted</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
September&#160;2006, the FASB issued SFAS No.&#160;157, <font style="DISPLAY: inline; FONT-STYLE: italic">Fair Value Measurements</font> (SFAS
157). SFAS 157 defines fair value as the amount that would be exchanged to sell
an asset or transfer a liability, in an orderly transaction between market
participants, and establishes a fair value hierarchy of quotes and unobservable
data that should be used to develop pricing assumptions. In addition, for assets
and liabilities that are not actively traded, for example, certain kinds of
derivatives, SFAS 157 requires that a fair value measurement include an
adjustment for risks</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">6</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">inherent
in a valuation technique and/or inputs, such as those used in pricing models.
SFAS 157 is effective for fiscal years beginning after November&#160;15, 2007.
The Company will adopt the provisions of the statement prospectively and is
evaluating the effect on its financial position and results of
operations.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
February 2007, the FASB issued SFAS No. 159, <font style="DISPLAY: inline; FONT-STYLE: italic">The</font>&#160;<font style="DISPLAY: inline; FONT-STYLE: italic">Fair Value Option for Financial
Assets and Financial Liabilities</font> (SFAS 159). SFAS 159 permits entities to
elect to measure eligible items at fair value as an alternative to hedge
accounting and to mitigate volatility in earnings. A company can either elect
the fair value option according to a pre-existing policy, when the asset or
liability is first recognized or when it enters into an eligible firm
commitment. Changes in the fair value of assets and liabilities that the Company
chooses to apply the fair value option to, are reported in earnings at each
reporting date. SFAS 159 also provides guidance on disclosures that are intended
to provide comparability to other companies&#8217; assets and liabilities that have
different measurement attributes and to other companies with similar financial
assets and liabilities. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the potential impact on
its statement of financial position and results of operations.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
June 2007, the FASB Emerging Issues Task Force (EITF) reached consensus on EITF
Issue No. 06-11, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting
for Income Tax Benefits of Dividends on Share-Based Payment Awards </font>(EITF
06-11). EITF 06-11 applies to share-based payment arrangements that entitle
employees to receive dividends or dividend equivalents and provides that the tax
benefit related to dividends on certain share-based awards be recognized as an
increase to additional paid-in capital and should be included in the pool of
excess tax benefits available to absorb future tax deficiencies on share-based
payment awards. EITF 06-11 will be applied prospectively to the income tax
benefits of applicable dividends declared by the Company for fiscal years
beginning after December 15, 2007. The Company is currently evaluating the
effect of adoption on its statement of financial position and results of
operations.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">On
December 4, 2007, the FASB issued SFAS No. 160, <font style="DISPLAY: inline; FONT-STYLE: italic">Noncontrolling Interests in
Consolidated Financial Statements</font> (SFAS 160). SFAS 160 is an amendment of
Accounting Research Bulletin (ARB) No. 51 and was issued to improve the
relevance, comparability, and transparency of the financial information that a
reporting entity provides in its consolidated financial statements. This
Statement applies to all entities that prepare consolidated financial
statements, except not-for-profit organizations, but will affect only those
entities that have an outstanding noncontrolling interest in one or more
subsidiaries. SFAS 160 clarifies that a noncontrolling interest in a subsidiary
is an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements and that a parent company must
recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS
160 is effective for fiscal years beginning after December 15, 2008 and early
adoption is prohibited. The Company is currently evaluating the potential impact
on its statement of financial position and results of operations.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">On
April 10, 2007, the FASB issued FASB Staff Position No. FIN 39-1 (FSP FIN 39-1),
<font style="DISPLAY: inline; FONT-STYLE: italic">Amendment of FASB
Interpretation No. 3</font><font style="DISPLAY: inline; FONT-STYLE: italic">9</font><font style="DISPLAY: inline; FONT-STYLE: italic">.</font><font style="DISPLAY: inline; FONT-STYLE: italic">&#160;</font>FSP FIN 39-1 provides
additional guidance for parties that are subject to master netting
arrangements.&#160;Specifically, for transactions that are executed with the
same counterparty, it permits companies to offset the fair value amounts
recognized for derivatives as well as the related fair value amounts of cash
collateral receivables or payables, when certain conditions apply.&#160;FSP FIN
39-1 is effective for fiscal years beginning after November 15, 2007, with early
application permitted.&#160;The Company&#8217;s policy is to present its derivative
positions and any receivables or payables with the same counterparty on a gross
basis, therefore, NJR does not anticipate that FSP FIN 39-1 will have an impact
on its statement of financial position and results of operations.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Restatement</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Subsequent
to the issuance of December 31, 2006 interim financial statements, the Company
determined that certain derivative financial instruments at NJRES and NJR Energy
were incorrectly accounted for as cash flow hedges. As a result, NJR concluded
that the change in fair value of these derivative instruments should be recorded
as a component of Gas purchases, or Operating revenues, as appropriate, in the
Condensed Consolidated Statements&#160;of Income and not in Other comprehensive
income, which is a component of Common Stock Equity, where they had been
previously reported in the Company&#8217;s Quarterly Report on Form 10-Q as of and for
the three-month period ended December 31, 2006.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
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        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">7</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Accordingly,
the following table sets forth the effects of the restatement on affected line
items in the Condensed Consolidated Statements of Income and Condensed
Consolidated Statements of Cash Flows for the three-month period ended December
31, 2006. Also included in the adjustment column, and as separate line items in
the tables below, are certain immaterial corrections that the Company made to
Other income and Equity in earnings of equity investees, net of tax for first
quarter of fiscal 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CONDENSED CONSOLIDATED STATEMENTS OF
INCOME</font></font></div>
    <div><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="63%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">As</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Previously</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Reported</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="4" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Adjustment</font></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">As</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Restated</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      revenue</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">741,465</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(4,064</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">628,685</font></div>
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">689,321</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">52,144</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2,686</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">54,830</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,989</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(693</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,296</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Income
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">46,258</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,993</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">48,251</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Income
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">18,134</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,100</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">19,234</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Equity
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">417</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">417</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">28,124</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,310</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">29,434</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Basic
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1.01</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
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CASH FLOWS</font></font></div>
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    <div align="left">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">28,124</font></div>
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,310</font></div>
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">29,434</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">120</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Equity
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(417</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="63%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,218</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">417</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,635</font></div>
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          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="63%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
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            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">879</font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="reg">RE</a>GULATION</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Filed Base Rate
Case</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
a result of increases in NJNG&#8217;s operating, maintenance and capital costs, NJNG
petitioned the New Jersey Board of Public Utilities (BPU), on November 20, 2007,
to increase base rates for delivery service by approximately $58.4 million,
which includes a return on NJNG&#8217;s equity component of 11.375 percent. This
petition is consistent with NJNG&#8217;s objectives of providing safe and reliable
service to its customers and earning a market-based return on its regulated
investments. Preliminary matters and timelines are being established among NJNG,
the BPU and Division of Rate Counsel (Rate Counsel) before the Office of the
Administrative Law Judge. Based upon statutory time frames and potential
regulatory lag, it is unlikely that any modification to NJNG&#8217;s delivery rates
would become effective during fiscal 2008.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Conservation Incentive Program
(CIP)</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
CIP allows NJNG to recover utility gross margin variations related to both
weather and customer usage. Recovery of such utility gross margin variations
(filed for annually and recovered one year following the end of the CIP usage
year) is subject to additional conditions, including an earnings test and an
evaluation of Basic Gas Supply Service (BGSS) related savings.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">8</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
October 2007, the BPU provisionally approved the implementation of NJNG&#8217;s
initial CIP recovery rates, based upon program information NJNG included in an
Amendment to its Petition for Annual Review, which was filed with the BPU in
August 2007. The approved rates add 1.7 percent to the average residential
heating customer&#8217;s bill and are designed to recover approximately $15.6 million
of previously accrued amounts.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
conjunction with the CIP, NJNG incurs costs related to its obligation to fund
programs that promote customer conservation efforts during the pilot program. As
of December 31, 2007, NJNG had a remaining liability of $1.2 million related to
these programs.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Basic Gas Supply
Service</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">BGSS
is a BPU approved rate mechanism designed to allow for the recovery of natural
gas commodity costs. NJNG periodically adjusts its rates to its residential and
small commercial customers to reflect increases or decreases in the cost of
natural gas sold to customers. The following are NJNG&#8217;s BGSS filings and related
rate adjustments or refunds during the first quarter of fiscal
2008:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">On
      October 3, 2007, the BPU provisionally approved a decrease to NJNG&#8217;s BGSS
      rate effective October 4, 2007, which results in a 3.6 percent decrease to
      the average residential customer bill.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">On
      November 26, 2007, NJNG notified the BPU that it would provide refunds and
      subsequently issued a credit to customers of $32 million in December 2007,
      as a result of the decrease in the anticipated costs of wholesale natural
      gas prices.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Other Incentive
Programs</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
is eligible to receive financial incentives for reducing BGSS costs through a
series of utility gross margin-sharing programs that include off-system sales,
capacity release, storage incentive and financial risk management (FRM)
programs. In October 2007, the BPU approved an extension of the utility gross
margin-sharing programs mentioned above through October 31, 2008. Concurrently,
the BPU reduced the sharing percentage of the margin generated by the FRM
program that will be retained by NJNG from 20 percent to 15 percent effective
November 1, 2007. The incentive programs are subject to revisions in NJNG&#8217;s base
rate case and remain in effect as currently established until it is
resolved.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Societal Benefits Clause (SBC) and
Weather Normalization Clause (WNC)</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
SBC is comprised of three primary components: a Universal Service Fund rider
(USF), a Manufactured Gas Plant Remediation Adjustment Clause (RAC), and the New
Jersey Clean Energy Program (NJCEP).</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
October 2007, the BPU approved the following adjustments to recovery rates
associated with the SBC programs:</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; TEXT-DECORATION: underline">SBC</font></font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$14.7
      million in eligible costs to be recovered annually for MGP remediation
      expenditures incurred through June 30, 2006;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in the recovery of NJCEP funding requirements from $6.3 million
      to $13.0 million for fiscal year 2008 due to the gradual increase in
      NJNG&#8217;s obligation to the State of New Jersey and a prior underrecovery,
      (NJNG&#8217;s liability as of December 31, 2007 was $11 million);
      and,</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">a
      decrease to the statewide USF recovery rate, which will have a negligible
      impact on customer rates.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">9</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
addition, the BPU approved an increase of $8.1 million, or 0.9 percent to the
WNC rate, to recover the net amounts deferred relating to weather related margin
variations during the 2004-2005 and 2005-2006 winter periods.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Regulatory Assets&#160;&amp;
Liabilities</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company had the following regulatory assets, all related to NJNG, on the
Condensed Consolidated Balance Sheets:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="37%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
31,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
            <td align="left" valign="bottom" width="16%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Recovery
      Period</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
      assets&#8211;current</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Underrecovered
      gas costs</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;&#160;&#160;9,300</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Less
      than one year<font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (1)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">WNC</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5,860</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,105</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Less
      than one year <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(2)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">CIP</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">14,085</font></font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">16,529</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Less
      than one year <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(3)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      current</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;29,245</font></font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;24,634</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
      assets&#8211;noncurrent</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Remediation
      costs (Note 12)</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Expended,
      net</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;85,533</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;85,071</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(4)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Liability
      for future expenditures</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">105,340</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">105,340</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(5)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">CIP</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4,191</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(6)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Deferred
      income and other taxes</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">13,815</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">13,979</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Various<font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(7)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Derivatives
      (Note 3)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">45,354</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">51,861</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(8)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Postemployment
      benefit costs (Note 9)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">33,614</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">33,988</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">(9)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">SBC</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">17,985</font></font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">22,130</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="bottom" width="16%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Various<font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (10)</font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      noncurrent</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$305,832</font></font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$312,369</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(1)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable,
      subject to BPU approval, through BGSS, without
interest.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(2)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable
      as a result of BPU approval in October 2007, without interest. This
      balance reflects the net results for the winter periods of 2004-2005 and
      2005-2006. No new WNC activity is being recorded due to the existence of
      the CIP. All previously deferred amounts related to the WNC have been
      approved for recovery.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(3)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $7.0 million relating to the weather component of
      the calculation and approximately $7.1 million relating to the customer
      usage component of the calculation. Recovery from customers is designed to
      be one year from date of rate approval by the BPU.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(4)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable,
      subject to BPU approval, with interest over rolling 7-year
      periods.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(5)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Estimated
      future expenditures. Recovery will be requested when actual expenditures
      are incurred.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(6)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $1.8 million relating to the weather component of
      the calculation and approximately $2.4 million relating to the customer
      usage component of the calculation.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(7)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable
      without interest, subject to BPU approval.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(8)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable,
      subject to BPU approval, through BGSS, without
interest.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(9)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable
      or refundable, subject to BPU approval, without interest. Includes
      unrecognized service costs recorded in accordance with SFAS No. 158, <font style="DISPLAY: inline; FONT-STYLE: italic">Employers&#8217; Accounting for
      Defined Benefit Pension and Other Postemployment Plans</font> that NJNG
      has determined are recoverable in rates charged to customers (see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 9. Employee Benefit
      Plans).</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(10)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">Recoverable
      with interest, subject to BPU
approval.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">If
there are any changes in regulatory positions that indicate the recovery of
regulatory assets is not probable, the related cost would be charged to income
in the period of such determination.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">10</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company had the following regulatory liabilities, all related to NJNG, on the
Condensed Consolidated Balance Sheets:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
31,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
      liability&#8211;current</font></div>
            </td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Overrecovered
      gas costs</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;9,583</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      current</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;9,583</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
      liabilities&#8211;noncurrent</font></div>
            </td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Cost
      of removal obligation <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)</font></font></font></font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$61,012</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$60,094</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Market
      development fund (MDF) <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(2)</font></font></font></font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,176</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total-noncurrent</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$61,012</font></font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$61,270</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(1)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">NJNG
      accrues and collects for cost of removal in rates. This liability
      represents collections in excess of actual expenditures. Approximately
      $19.9 million, including accretion of $350,000 for the three-month period
      ended December 31, 2007, of regulatory assets relating to asset retirement
      obligations have been netted against the cost of removal obligation as of
      December 31, 2007 (see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 10. Asset Retirement
      Obligations).</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="3%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">(2)</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman, times new roman, serif">The
      MDF provided financial incentives to encourage customers to switch to
      third party suppliers and has supported other unbundling related
      initiatives. The MDF funding obligations terminated as of October&#160;31,
      2006 and the remaining balance was credited back to customers through the
      BGSS in October 2007.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">3.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="deriv">DERI</a>VATIVE
      INSTRUMENTS</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company and its subsidiaries are subject to market risk due to fluctuations in
the price of natural gas. To manage the risk of such fluctuations, the Company
and its subsidiaries enter into futures contracts, option agreements and swap
agreements to economically hedge future purchases and sales of natural
gas.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">On
October 1, 2007, the Company changed the treatment of its physical commodity
contracts at NJRES, such that all contracts entered into after September 30,
2007 are now recognized as derivative instruments, and are not accounted for
using the &#8220;normal purchase normal sales&#8221; scope exception of Statement of
Financial Accounting Standards No. 133, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Derivative
Instruments and Hedging Activities</font> (as amended and interpreted, SFAS
133). All NJRES physical commodity contracts entered into after September 30,
2007, are accounted for at fair value on the Condensed Consolidated Balance
Sheets, with changes in fair value being reflected as a component of Operating
revenues on the Condensed Consolidated Statements of Income. All physical
commodity contracts at NJRES that were in existence prior to October 1, 2007,
which were previously designated as meeting the normal purchase normal sales
scope exception of SFAS 133, as well as physical commodity contracts at NJNG and
NJR Energy, which also meet the normal purchase normal sale scope exception,
continue to be accounted for under accrual accounting.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">All
of the Company&#8217;s financial instruments (financial futures, options or swaps),
are accounted for as derivatives in accordance with SFAS&#160;133 and recorded
at fair value in the Condensed Consolidated Balance Sheets. Changes in fair
value are recorded as a component of Gas purchases or Operating revenues, for
NJRES and NJR Energy, respectively, in the Condensed Consolidated Statements of
Income as unrealized gains or losses. Changes in fair value of NJNG&#8217;s financial
derivative instruments are recorded as a component of Regulatory assets or
liabilities in the Condensed Consolidated Balance Sheets, as these amounts will
be recovered through future BGSS amounts as an increase or reduction to the cost
of natural gas in NJNG&#8217;s tariff.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">When
certain financial derivative instruments at NJRES settle prior to the actual
sale of the natural gas inventory purchases that they were designed to
economically hedge, NJRES records realized gains or losses as a component of Gas
purchases in the Condensed Consolidated Statements of Income.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">11</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Unrealized
gains (losses) and realized gains (losses) at NJRES related to financial
derivative instruments that are included as a component of Gas purchases, and
unrealized gains (losses) at NJR Energy related to financial derivative
instruments and unrealized gains (losses) at NJRES related to physical commodity
contracts that are included as a component of Operating revenues, for the three
months ended December 31, 2007 and 2006 are as follows:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJRES:</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
      gains &#8211; Physical Commodity Contracts</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;&#160;2,044</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
      (losses) gains &#8211; Financial Instruments</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(6,966</font></font></div>
            </td>
            <td align="justify" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,039</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Realized
      (losses) &#8211; Financial Instruments</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(5,163</font></font></div>
            </td>
            <td align="justify" valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(1,289</font></div>
            </td>
            <td align="justify" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Subtotal
      NJRES</font></font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$(10,085</font></font></div>
            </td>
            <td align="justify" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      6,750</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJR
      Energy</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
      gains (losses) &#8211; Financial Instruments</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(305</font></font></div>
            </td>
            <td align="justify" valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(4,064</font></div>
            </td>
            <td align="justify" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      NJRES and NJR Energy unrealized and realized (losses)
gains</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$(10,390</font></font></div>
            </td>
            <td align="justify" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      2,686</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Generally,
exchange-traded futures contracts require a deposit of margin cash, the amount
of which is subject to change based on market price movements and in accordance
with exchange rules. The Company maintains broker margin accounts for NJNG and
NJRES. The balances are as follows:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
31,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September&#160;30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJNG
      broker margin deposit</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;39</font></font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      12,345</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJNG
      broker margin (liability)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$(1,917</font></font></div>
            </td>
            <td align="justify" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJRES
      broker margin deposit (liability)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$ 8,551</font></font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(15,143</font></div>
            </td>
            <td align="justify" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="invest">INV</a>ESTMENTS
      IN EQUITY INVESTEES</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR&#8217;s
Investments in equity investees include the following investments:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
31,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September&#160;30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Steckman
      Ridge</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$60,881</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$56,726</font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Iroquois</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">20,844</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">22,073</font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="54%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">8,177</font></font></div>
            </td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">7,944</font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$89,902</font></font></div>
            </td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$86,743</font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
uses the equity method of accounting for its investments in Steckman Ridge and
Iroquois.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Other
investments represent investments in equity securities of publicly traded energy
companies, all of which are immaterial on an individual basis, and are accounted
for as available for sale securities, with any change in the value of such
investments recorded as Accumulated other comprehensive income, a component of
Common stock equity.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">12</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following is summarized financial information for Iroquois, as of and for the
three-month periods as indicated below:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1pt solid">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="76%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      revenues</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">38,754</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">39,519</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="76%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      income</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">19,298</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">20,021</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      income</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">7,582</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">7,473</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Millions)</font></font></div>
            </td>
            <td colspan="4" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
31,</font></font></div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September&#160;30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      assets</font></div>
            </td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">791.0</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
      $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">814.3</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="eps">EAR</a>NINGS PER
      SHARE</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following table presents the calculation of the Company&#8217;s basic and diluted
earnings per share:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands, except per share
      amounts)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      Income, as reported</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$30,185</font></font></div>
            </td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$29,434</font></div>
            </td>
            <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Basic
      earnings per share</font></div>
            </td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average shares of common stock outstanding&#8211;basic</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">27,785</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">27,713</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Basic
      earnings per common share</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.09</font></font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$1.06</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Diluted
      earnings per share</font></div>
            </td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average shares of common stock outstanding&#8211;basic</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">27,785</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">27,713</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Incremental
      shares <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)</font></font></font></font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">167</font></font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">191</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average shares of common stock outstanding&#8211;diluted</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">27,952</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">27,904</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Diluted
      earnings per common share</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$1.08</font></font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$1.05</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 40pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)&#160;&#160;</font></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Incremental shares consist of
      stock options, stock awards and performance
  units.</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">On
January 23, 2008 the Company announced a three for two stock split payable on
March 3, 2008 with fractional shares paid in cash. The amounts above do not
include the effect of this proposed stock split. The following table shows the
impact of the planned stock split on the number of shares outstanding and
calculated basic and diluted earnings per share as if it occurred at the
beginning of the earliest period presented:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Pro- Forma</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands, except per share
      amounts)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      Income</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$30,185</font></font></div>
            </td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$29,434</font></div>
            </td>
            <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Basic
      earnings per share</font></div>
            </td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average shares of common stock outstanding&#8211;basic</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">41,678</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">41,570</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Basic
      earnings per common share</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.72</font></font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$0.71</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Diluted
      earnings per share</font></div>
            </td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average shares of common stock outstanding&#8211;basic</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">41,678</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">41,570</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Incremental
      shares</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">250</font></font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">287</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average shares of common stock outstanding&#8211;diluted</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">41,928</font></font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">41,857</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="54%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Diluted
      earnings per common share</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$0.72</font></font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$0.70</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">13</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">6.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="dbt">DE</a>BT</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">NJR</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">On
December 13, 2007, NJR refinanced its prior senior credit facility for a new
$325 million, five-year, revolving, unsecured credit facility. The new credit
facility permits the borrowing of amounts under a revolving basis, as well as
the issuance of letters of credit. It also permits an increase to the facility,
from time to time, with the existing or new lenders, in a minimum of $5 million
increments up to a maximum $100 million. The new credit facility refinances an
earlier credit facility that provided for $325 million in revolving credit that
was scheduled to expire on December 16, 2007. The Company used the initial
borrowings under the new credit facility to refinance its prior credit facility
and pay all related fees and expenses. Depending on borrowing levels and credit
ratings, NJR&#8217;s interest rate can either be, at its discretion, the London
inter-bank offered rate (&#8220;LIBOR&#8221;) or the Federal Funds Open Rate plus an
applicable spread and facility fee. As of December 31, 2007, NJR&#8217;s effective
rate was 5.18% on outstanding borrowings of $92.6 million under this credit
facility.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
of December 31, 2007, NJR had four letters of credit outstanding, totaling $17.5
million, on behalf of NJRES. Two letters of credit, totaling $4.5 million, are
used in conjunction with a long-term natural gas storage agreement and expire on
December 31, 2008. The other two letters of credit, totaling $13 million, are
used for margin and collateral requirements for natural gas transactions and
expire on March 31, 2008.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
also has a $675,000 letter of credit outstanding on behalf of CR&amp;R, which
will expire on December 31, 2008. The letter of credit is in place to support
development activities.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">These
letters of credit reduce the amount available under NJR&#8217;s committed credit
facility by the same amount. NJR does not anticipate that these letters of
credit will be drawn upon by the counterparties and they will be renewed as
necessary.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">NJNG</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
August 2007, the BPU approved NJNG&#8217;s petition requesting authorization to issue
and sell, in one or more series, an aggregate of $125 million in medium-term
notes through July 31, 2010. The notes may be issued on a secured or unsecured
basis and maturities can range from one to forty years. The proceeds from the
issuance of the notes will be used to refinance short-term debt, which has been
incurred to fund capital expenditure requirements and pension and other
post-employment benefit programs. NJNG is currently seeking approval to revise
the market yield spread conditions of the BPU&#8217;s prior approval to reflect
current credit market conditions. Provided that such approval is granted by the
BPU, the notes are anticipated to be issued during the second quarter of fiscal
2008.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
received $7.5 million and $5.5 million in December 2007 and 2006, respectively,
in connection with the sale-leaseback of its natural gas meters. This
sale-leaseback program is expected to be continued on an annual
basis.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">At
December 31, 2007, NJNG had a stand alone letter of credit in the amount of $3
million, which will expire on December 31, 2008. This letter of credit does not
reduce the amount available to be borrowed under NJNG&#8217;s credit facility. NJNG
does not anticipate that this letter of credit will be drawn upon by the
counterparty, and it will be renewed as necessary, upon its
expiration.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Neither
NJNG nor the results of its operations are obligated or pledged to support the
NJR or NJRES credit facilities.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">NJRES</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
of December 31, 2007 NJRES had a 3-year $30 million committed credit facility
that expires in October 2009 with a multinational financial institution. There
were no borrowings under this facility as of December 31, 2007.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">14</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Consolidated</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">There
were no issuances or redemptions of long-term debt securities for NJR, NJNG or
NJRES during the three months ended December 31, 2007</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">A
summary of NJR&#8217;s and NJNG&#8217;s long-term debt, committed credit facilities which
require commitment fees on the unused amounts, and NJRES&#8217; committed facility
that does not require a fee, are as follows:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="49%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="49%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="49%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJR</font></div>
            </td>
            <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Long
      - term debt <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)</font></font></font></font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$75,000</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$75,000</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Bank
      credit facilities</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$325,000</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$325,000</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="49%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Amount
      outstanding at end of period</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$92,600</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$40,250</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="49%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average interest rate at end of period</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5.18</font></font></div>
            </td>
            <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">6.17</font></div>
            </td>
            <td align="left" valign="top" width="3%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="49%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJNG
      <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(2)</font></font></font></font></div>
            </td>
            <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Long
      - term debt <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)</font></font></font></font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$254,800</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$254,800</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Bank
      credit facilities</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$250,000</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$250,000</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="49%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Amount
      outstanding at end of period</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$190,100</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$175,700</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="49%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average interest rate at end of period</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4.48</font></font></div>
            </td>
            <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">5.19</font></div>
            </td>
            <td align="left" valign="top" width="3%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="49%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJRES</font></div>
            </td>
            <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Bank
      credit facilities</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$30,000</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$30,000</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="49%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="49%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Amount
      outstanding at end of period</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#8212;</font></font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$30,000</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="49%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average interest rate at end of period</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#8212;</font></font></div>
            </td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">5.78</font></div>
            </td>
            <td align="left" valign="top" width="3%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 40pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)&#160;&#160;</font></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Long-term debt excludes lease
      obligations of $59.3 million <font style="DISPLAY: inline; FONT-SIZE: 8pt">and $53.3 million </font>at
      December 31, 2007 and September 30, 2007,
    respectively.</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 40pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(2)&#160;&#160;</font></font></div>
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">The table includes only
      committed credit facilities for short-term borrowings. Also included in
      short-term debt on the Condensed Consolidated balance sheet as of December
      31, 2007 and September 30, 2007, are $6.3 and $10.5 million, respectively,
      related to an uncommitted credit
  facility.</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">7.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="cap">CAP</a>ITALIZED
      FINANCING COSTS AND DEFERRED
INTEREST</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Allowance
for Funds Used During Construction, (AFUDC) included in Utility plant, and
capitalized interest included in Real estate properties and other and
Investments in equity investees on the Condensed Consolidated Balance Sheets,
are as follows: </font><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td colspan="4" valign="bottom" width="28%">
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31</font>,</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="50%" style="BORDER-BOTTOM: black 2px solid">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">($ in
      thousands)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
              </td>
              <td valign="top" width="4%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 2px solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
              </td>
              <td valign="top" width="5%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="50%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">AFUDC
      &#8211; Utility plant</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$535</font></font></div>
              </td>
              <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="right" valign="bottom" width="9%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$379</font></div>
              </td>
              <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="50%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average rate</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">8.31</font></font></div>
              </td>
              <td align="left" valign="top" width="4%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></div>
              </td>
              <td align="right" valign="bottom" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">5.36</font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="50%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Capitalized
      interest &#8211; Real estate properties and other</font></div>
              </td>
              <td align="right" valign="top" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$36</font></font></div>
              </td>
              <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="right" valign="top" width="9%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      43</font></div>
              </td>
              <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="50%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average interest rates</font></div>
              </td>
              <td align="right" valign="top" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5.08</font></font></div>
              </td>
              <td align="left" valign="top" width="4%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></div>
              </td>
              <td align="right" valign="top" width="9%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">5.55</font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="50%">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Capitalized
      interest &#8211; Investments in equity investees</font></div>
              </td>
              <td align="right" valign="top" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$855</font></font></div>
              </td>
              <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="right" valign="top" width="9%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;&#8212;</font></div>
              </td>
              <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="50%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Weighted
      average interest rates</font></div>
              </td>
              <td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5.98</font></font></div>
              </td>
              <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></div>
              </td>
              <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
              </td>
              <td valign="top" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            </tr>
        </table>
      </div>
      <div><br>&#160;</div>
    </div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">15</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Commencing
on October 1, 2007, NJNG is including a capitalized cost of equity, at its
currently allowed return on equity rate of 11.5 percent, for its utility plant
construction as a component of AFUDC. Amounts shown in the table above for the
three months ended December 31, 2006 represent an interest cost component
only.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR,
through its CR&amp;R subsidiary, capitalizes interest associated with the
development and construction of its commercial buildings. Interest is also
capitalized associated with the acquisition, development and construction of a
natural gas storage facility through NJR&#8217;s equity investment in Steckman Ridge
(see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 4. Investments in
Equity Investees</font>).</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Pursuant
to a BPU order, NJNG is permitted to recover carrying costs on uncollected
balances related to SBC program costs, which include NJCEP, RAC and USF
expenditures. Accordingly, Other income included $738,000 and $887,000 of
deferred interest related to these SBC program costs for period ended December
31, 2007 and 2006, respectively.</font></div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">8.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="stock">STO</a>CK-BASED
      COMPENSATION</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">On
November 14, 2007, the Company granted 41,320 performance units, which are
market condition awards and vest in September 2010, and 41,320 shares of
restricted stock, which vest in equal installments over three years, subject to
certain conditions. On the same date, the Company also granted 23,590 restricted
shares that vest immediately. During the first quarter of fiscal 2008, 11,237
shares were issued pursuant to performance units granted in fiscal 2005 that
were earned as of September 30, 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">During
the first three months of fiscal 2008, included in operation and maintenance
expense is $483,000 related to stock based compensation. There is approximately
$5.0 million of deferred compensation expense related to unvested shares,
options and performance units that are expected to be recognized over the next 3
years.</font></div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">9.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="emplo">EMP</a>LOYEE
      BENEFIT PLANS</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Pension and Other Postemployment
Benefit Plans (OPEB)</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
components of the net periodic cost for pension benefits, including NJR&#8217;s
Pension Equalization Plan, and OPEB costs (principally health care and life
insurance) for employees and covered dependents were as follows:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="41%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="19%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Pension</font></font></div>
            </td>
            <td colspan="4" valign="bottom" width="18%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">OPEB</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="41%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td colspan="4" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="41%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="41%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Service
      cost</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;&#160;728</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;733</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;488</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;454</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="41%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Interest
      cost</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">1,648</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,554</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">821</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">757</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="41%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Expected
      return on plan assets</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(2,183</font></font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(2,052</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(583</font></font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(541</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="41%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Recognized
      actuarial loss</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">275</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">399</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">262</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">266</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="41%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Prior
      service cost amortization</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">14</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">20</font></font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">20</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="41%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Transition
      obligation amortization</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#8212;</font></font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">89</font></font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">89</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="41%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      periodic cost</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$&#160;&#160;&#160;482</font></font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;655</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$1,097</font></font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$1,045</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
fiscal 2008, the Company has no minimum pension funding requirements. The
Company&#8217;s funding to its OPEB plans is expected to be approximately $1.5 million
in fiscal 2008 and $1.1 million annually, over the next four years. Additional
contributions may be made based on market conditions and various
assumptions.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">16</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 40pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">10.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="aro">ASS</a>ET
      RETIREMENT OBLIGATIONS (ARO)</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
recognizes AROs related to the costs associated with cutting and capping its
main and service gas distribution pipelines of NJNG, which is required by New
Jersey law when taking such gas distribution pipeline out of
service.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following is an analysis of the change in the ARO liability for the period ended
December 31, 2007, in thousands:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="56%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="21%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="56%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Balance
      at October 1, 2007</font></div>
            </td>
            <td align="right" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$23,895</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="56%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Accretion</font></div>
            </td>
            <td align="right" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">350</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="56%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Additions</font></div>
            </td>
            <td align="right" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="56%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Retirements</font></div>
            </td>
            <td align="right" valign="top" width="21%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(177</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="56%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Balance at December 31,
      2007</font></font></div>
            </td>
            <td align="right" valign="top" width="21%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$24,068</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Accretion
amounts are not reflected as an expense on NJR&#8217;s Condensed Consolidated
Statements of Income, but rather are deferred as a regulatory asset and netted
against NJNG&#8217;s regulatory liabilities, for presentation purposes, on the
Condensed Consolidated Balance Sheet.</font></div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 40pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">11.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="adpoy">ADO</a>PTION OF
      FIN 48</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">During
2006, the FASB issued Interpretation No. 48, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Uncertainty in Income
Taxes &#8211; An Interpretation of FASB Statement No. 109</font> (FIN 48), which is
effective for the Company in fiscal 2008. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an entity&#8217;s financial statements in
accordance with FASB Statement No. 109, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Income Taxes
</font>(SFAS 109) and prescribes a recognition threshold and measurement
attributes for financial statement disclosure of tax positions taken or expected
to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax
position on the income tax return must be recognized at the largest amount that
is more-likely-than-not to be sustained upon audit by the relevant taxing
authority. An uncertain income tax position will not be recognized if it does
not have a greater than 50 percent likelihood of being sustained. Additionally,
FIN 48 provides guidance on derecognition, declassification and interest and
penalties, among other items.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company adopted the provisions of FIN 48 on October 1, 2007. The total amount of
FIN 48 liabilities as of the date of adoption was $6.5 million, including $4.7
million of uncertain tax liabilities and $1.8 million of interest and penalties.
As a result of the implementation of FIN 48, the Company recognized an
additional $4.3 million as an increase in the liability for unrecognized tax
benefits and interest. The previously recorded amount of $2.2 million, as well
as the additional amount recognized associated with the adoption of FIN 48, are
included as a component of Deferred and accrued taxes in the Current
classification of the Condensed Consolidated Balance Sheets. The following table
represents the increase in liability with respect to the adoption of FIN
48:</font></div>
    <div><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="830" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">($ in
      millions)</font></font></div>
            </td>
            <td colspan="4" valign="bottom" width="135" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">As of
      October&#160;1,</font></font></div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="86%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Increase
      in Retained Earnings (cumulative effect)</font></div>
            </td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="2%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1.2</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="86%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Decrease
      in Deferred income taxes</font></div>
            </td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(4.3</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="86%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Increase
      in Deferred and accrued taxes (FIN 48 liability)</font></div>
            </td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">4.3</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">There
are&#160;$1.7 million of state taxes included in the balance of unrecognized tax
benefits as of October 1, 2007. If they&#160;were to be recognized, it would
affect the effective tax rate, as this amount had previously been fully reserved
for, and was fully reflected as a component of current Deferred and accrued
taxes in the Condensed Consolidated Balance Sheets.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">17</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">There
is $3.1 million included in the balance of unrecognized tax benefits as of
October 1, 2007 that relates to a filing position the Company took concerning
the depreciable life of certain of its fixed assets at NJNG. The Company filed
an automatic change in method of accounting which is currently under audit with
the Internal Revenue Service (IRS). The Company anticipates closing the audit
and settling this issue within the next 12 months. The settlement of this issue
would reduce the FIN 48 reserve by approximately $3.6 million, which includes
associated interest.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company recognizes interest and penalties accrued related to unrecognized tax
benefits as additional tax expense. Upon adoption of FIN 48 on October 1, 2007
the Company had $1.8 million of accrued interest and penalties related to the
above liability computed under FIN 48, which had previously been expensed in the
Condensed Consolidated Statements of Income.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company and one or more of its subsidiaries files income tax returns in the
United States Federal jurisdiction and in the states of New Jersey, New York and
Connecticut. The Company neither files in, nor believes it has a filing
requirement in, any foreign jurisdictions.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company is no longer subject to United States federal income tax examinations
for years prior to fiscal 2004. The IRS commenced an examination of the
Company&#8217;s fiscal 2005 federal income tax return during the third quarter of
fiscal 2007. The exam is expected to be completed by the end of fiscal
2008.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company is not currently under examination in any state but the periods ended
September 30, 2003 forward are all statutorily open to examination. In New
Jersey, NJNG currently has an open Tax Court case for the periods September 30,
1998 through September 30, 2002, which relates to New Jersey tax apportionment
rules. The Company expects a final tax court ruling related to this case during
fiscal 2008, and the unrecognized benefit of the $1.7 million of state taxes
that is included as part of the entire initial adoption of FIN 48, as described
above.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">An
unfavorable ruling would result in a tax, interest and penalty expense of
approximately $2.9 million. This liability has previously been reserved for, and
the tax and interest would be deductible for federal income tax
purposes.</font></div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 40pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">12.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="comm">COM</a>MITMENTS
      AND CONTINGENT LIABILITIES</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Cash
Commitments</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
has entered into long-term contracts, expiring at various dates through 2022,
for the supply, storage and delivery of natural gas. These contracts include
current annual fixed charges of approximately $85.7 million at current contract
rates and volumes, which are recoverable through the BGSS.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">For
the purpose of securing adequate storage and pipeline capacity, NJRES enters
into storage and pipeline capacity contracts, which require the payment of
certain demand charges by NJRES, in order to maintain the ability to access such
natural gas storage or pipeline capacity, during a fixed time period, which
generally range from one to five years. Demand charges are based on established
rates as regulated by the Federal Energy Regulatory Commission (FERC). These
demand charges represent commitments to pay storage providers or pipeline
companies for the right to store and transport natural gas utilizing their
respective assets. As of December 31, 2007, NJRES had contractual obligations
for demand charges related to storage contracts and pipeline capacity contracts
of $32.1 million and $59.9 million, respectively.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
of December 31, 2007, there were NJR guarantees covering approximately $352
million of natural gas purchases and demand fee commitments of NJRES and NJNG
not yet reflected in Accounts payable on the Condensed Consolidated Balance
Sheet.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">18</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Costs
for storage and pipeline demand fees, included as a component of Gas purchases
on the Condensed Consolidated Statements of Income, are as follows:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="85%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="top" width="15%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="85%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td align="right" valign="top" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td valign="top" width="6%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2006</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="85%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJRES</font></div>
            </td>
            <td align="right" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$27.6</font></font></div>
            </td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$36.8</font></div>
            </td>
            <td colspan="2" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="85%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJNG</font></div>
            </td>
            <td align="right" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">18.7</font></font></div>
            </td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">19.3</font></div>
            </td>
            <td colspan="2" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="85%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$46.3</font></font></div>
            </td>
            <td valign="top" width="6%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$56.1</font></div>
            </td>
            <td colspan="2" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
capital expenditures are estimated at $78.6 million for fiscal 2008, of which
approximately $16.4 million has been committed, and consists primarily of its
construction program to support customer growth, maintenance of its distribution
system and replacement needed under pipeline safety regulations.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company&#8217;s future minimum lease payments under various operating leases are less
than $3.0 million annually for the next five years and $2.2 million in the
aggregate for all years thereafter.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Legal
Proceedings</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Manufactured Gas Plant
Remediation</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
is responsible for the remedial cleanup of three Manufactured Gas Plant (MGP)
sites, dating back to gas operations in the late 1800s and early 1900s, which
contain contaminated residues from former gas manufacturing operations. NJNG is
currently involved in administrative proceedings with the New Jersey Department
of Environmental Protection (NJDEP) with respect to two of the sites, as well as
participating in various studies and investigations by outside consultants to
determine the nature and extent of any such contaminated residues and to develop
appropriate programs of remedial action, where warranted, under Administrative
Consent Orders or Memoranda of Agreement with the NJDEP.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
may, subject to BPU approval, recover its remediation expenditures, including
carrying costs, over rolling 7-year periods pursuant to a remediation adjustment
clause (RAC) approved by the BPU. In October 2007, the BPU approved $14.7
million in eligible costs to be recovered annually for MGP remediation
expenditures incurred through September 30, 2006. As of December 31, 2007, $85.5
million of previously incurred remediation costs, net of recoveries from
customers and insurance proceeds, are included in Regulatory assets on the
Condensed Consolidated Balance Sheet.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
September 2007, NJNG updated an environmental review of the MGP sites, including
a review of potential liability for investigation and remedial action. NJNG
estimated at the time of the review that total future expenditures to remediate
and monitor the three MGP sites for which it is responsible will range from
approximately $105.3 million to $164.8 million. NJNG&#8217;s estimate of these
liabilities is based upon known facts, existing technology and enacted laws and
regulations in place when the review was completed. However, NJNG expects actual
costs to differ from these estimates. Where it is probable that costs will be
incurred, but the information is sufficient only to establish a range of
possible liability, and no point within the range is more likely than any other,
it is NJNG&#8217;s policy to accrue the lower end of the range. Accordingly, NJNG has
recorded an MGP remediation liability and a corresponding Regulatory asset of
$105.3 million on the Condensed Consolidated Balance Sheet. The actual costs to
be incurred by NJNG are dependent upon several factors, including final
determination of remedial action, changing technologies and governmental
regulations, the ultimate ability of other responsible parties to pay and any
insurance recoveries.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
is presently investigating the potential settlement of alleged Natural Resource
Damage claims that might be brought by the NJDEP concerning the three MGP sites.
NJDEP has not made any specific demands for compensation for alleged injury to
groundwater or other natural resources. NJNG&#8217;s evaluation of these
potential</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">19</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">claims
is in the early stages, and it is not yet possible to quantify the amount of
compensation, if any, that NJDEP might seek to recover. NJNG anticipates any
costs associated with this matter would be recoverable through the
RAC.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
will continue to seek recovery of MGP-related costs through the RAC. If any
future regulatory position indicates that the recovery of such costs is not
probable, the related cost would be charged to income in the period of such
determination. However, because recovery of such costs is subject to BPU
approval, there can be no assurance as to the ultimate recovery through the RAC
or the impact on the Company&#8217;s results of operations, financial position or cash
flows, which could be material.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">General</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company is party to various other claims, legal actions and complaints arising
in the ordinary course of business. In the Company&#8217;s opinion, other than as
disclosed above, the ultimate disposition of these matters will not have a
material adverse effect on its financial condition, results of operations or
cash flows.</font></div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 40pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">13.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="bus">BUSI</a>NESS
      SEGMENT DATA</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Information
related to the Company&#8217;s various business segments, which are presented in the
Condensed Consolidated Statements of Cash Flows, is detailed below.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Natural Gas Distribution segment consists of regulated energy and off-system,
capacity and storage management operations. The Energy Services segment consists
of unregulated wholesale energy operations. The Retail and Other segment
consists of appliance and installation services, commercial real estate
development, investments and other corporate activities.</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
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            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Retail
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            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Subtotal</font></div>
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">811,202</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">737,470</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Intersegment
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            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(64</font></font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">)</font></font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(69</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">737,401</font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Depreciation
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            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Natural
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">9,233</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,738</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">53</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">54</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Retail
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            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">117</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">36,716</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21,596</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Retail
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            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">372</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(3,482</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">54,537</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">54,830</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
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            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Natural
      Gas Distribution</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">16,670</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">19,908</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
      Services</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">13,150</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">11,524</font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Retail
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            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">365</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(1,998</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">30,185</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">29,434</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 40pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)&#160;&#160;</font></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Consists of transactions
      between subsidiaries that are eliminated in
      consolidation.</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">20</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="78%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 40pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">14.</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="other">OT</a>HER</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">At
December 31, 2007, there were 27,815,759 shares of common stock outstanding and
the book value per share was $24.01.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">IT<a name="mda">EM 2.
      MANAGEMENT&#8217;S </a>DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS </font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Management&#8217;s
Overview</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">New
Jersey Resources Corporation (NJR or the Company) is an energy services holding
company providing retail natural gas service in New Jersey and wholesale natural
gas and related energy services to customers in states from the Gulf Coast and
Mid-Continent regions to the New England region and Canada through its two
principal subsidiaries, New Jersey Natural Gas (NJNG) and NJR Energy Services
(NJRES).</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Comprising
the Natural Gas Distribution segment, NJNG is a natural gas utility that
provides regulated retail natural gas service in central and northern New Jersey
and also participates in the off-system sales and capacity release markets. NJNG
is regulated by the New Jersey Board of Public Utilities (BPU).</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
maintains and transacts around a portfolio of physical assets consisting of
natural gas storage and transportation contracts. In addition, NJRES provides
wholesale energy services to non-affiliated utility and energy companies. NJRES
comprises the Energy Services segment.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Retail and Other segment includes NJR Home Services (NJRHS), which provides
service, sales and installation of appliances; NJR Energy (NJRE), an investor in
energy-related ventures, most significantly through NJNR Pipeline, which holds
the Company&#8217;s 5.53 percent interest in Iroquois Gas and Transmission System, LP
(Iroquois), a 412-mile natural gas pipeline from the New York-Canadian border to
Long Island, New York, and NJR Steckman Ridge Storage Company, which has a 50
percent equity ownership interest in Steckman Ridge GP, LLC and Steckman Ridge,
LP (collectively, Steckman Ridge), a planned 17.7 billion cubic foot (Bcf)
natural gas storage facility, with up to 12 Bcf working capacity, that is being
jointly developed and constructed with a partner in western Pennsylvania; NJR
Investment, which makes energy-related equity investments; Commercial Realty and
Resources (CR&amp;R), which holds and develops commercial real estate; and NJR
Service Company, which provides support services to the various NJR
businesses</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
has restated the financial statements for the period ended December 31, 2006
related to a change in accounting for certain derivative financial instruments.
Refer to <font style="DISPLAY: inline; FONT-STYLE: italic">Note 1. General,
</font>herein.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Net
income by business segment is as follows:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="69%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="9" valign="bottom" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="69%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">($&#160;in&#160;thousands)</font></font></div>
            </td>
            <td colspan="4" valign="bottom" width="15%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      Income</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Natural
      Gas Distribution</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$16,670</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">55</font></font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></div>
            </td>
            <td valign="top" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$19,908</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">68</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
      Services</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">13,150</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">44</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">11,524</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">39</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="69%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Retail
      and Other</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">365</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">1</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="7%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(1,998</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(7</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="69%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$30,185</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">100</font></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></div>
            </td>
            <td valign="top" width="7%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$29,434</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">100</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">21</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
and NJR Energy account for certain of its derivative instruments (financial
futures, swaps and options) used to economically hedge the forecasted purchase,
sale and transportation of natural gas at fair value, as required under
Statement of Financial Accounting Standards No. 133, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Derivative
Instruments and Hedging Activities</font> (as amended and interpreted, SFAS
133). In addition, effective October 1, 2007, NJRES is no longer electing the
&#8220;normal purchase normal sale&#8221; (NPNS) scope exception of SFAS 133 for contracts
that result in the physical purchase or sale of natural gas at NJRES. As such,
any new contracts to purchase or sell the natural gas commodity are accounted
for as derivatives, at fair value, at NJRES.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
change in fair value of these derivative instruments at NJRES and NJR Energy
over periods of time, referred to as unrealized gains or losses, can result in
substantial volatility in reported net income under generally accepted
accounting principles of the United States of America (GAAP). When a financial
instrument settles the result is the realization of these gains or losses. NJRES
utilizes certain financial instruments to economically hedge inventory placed
into storage that will be sold at a later date, all of which were contemplated
as part of an entire forecasted transaction. GAAP requires that when a financial
instrument that is economically hedging natural gas that has been placed into
inventory, but not yet sold, has been settled, the realized gain or loss
associated with that settlement must be reflected currently in the income
statement. While NJRES will recognize the same economic impact from the entire
planned transaction, this also leads to additional volatility in NJRES&#8217;
earnings.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Unrealized
losses and gains at NJRES and NJR Energy are the result of changes in the fair
value of natural gas futures and basis swaps, as applicable, used to
economically hedge future natural gas sales, purchases and transportation.
Additionally NJRES records unrealized gains and losses on physical natural gas
commodity contracts entered into after September 30, 2007. Realized gains and
losses at NJRES are the result of the settlement of natural gas futures
instruments used to economically hedge natural gas purchases in inventory that
have not been sold.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Included
in Net income in the table above are unrealized (losses) and gains in the Energy
Services segment of $(2.9) million and $4.5 million, after taxes, for the
three-month period ended December 31, 2007 and 2006, respectively. Also included
in Net income in the table above are realized (losses) of $(3.0) million and
$(759,000), after taxes, for the three-month period ended December 31, 2007 and
2006, respectively, related to derivative instruments that have settled that are
designed to economically hedge natural gas that is still in storage
inventory.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Included
in Net income above are unrealized (losses) in the Retail and Other segment of
$(180,000) and $(2.4) million, after taxes, for the period ended December 31,
2007 and 2006, respectively.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Natural Gas Distribution
Segment</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Natural
Gas Distribution operations have been managed with the goal of growing
profitably through several key initiatives including:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Assessing
      the market and timing with respect to filing for a base rate increase,
      which takes into account many factors, including, but not limited to,
      earning a reasonable rate of return on the investments that have been
      constructed in the gas distribution system, as well as recovery of all
      prudently incurred costs in order to provide reliable service throughout
      NJNG&#8217;s service territory.</font></div>
              <div>&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Based
      upon increases in NJNG&#8217;s operating, maintenance and capital costs, NJNG
      petitioned the BPU, on November 20, 2007, to increase base rates for its
      natural gas delivery service by approximately $58.4 million, including a
      return on NJNG&#8217;s equity component of 11.375 percent. This base rate case
      filing is consistent with NJNG&#8217;s objectives of providing safe and reliable
      service to its customers and earning a market-based return. Based upon
      statutory time frames and potential regulatory lag, it is unlikely that
      any modification to its delivery rates would become effective during
      fiscal 2008;</font></div>
              <div>&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">22</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Working
      with the BPU and New Jersey Department of the Public Advocate, Rate
      Counsel, for the development of the decoupling of the impact of customer
      usage on utility gross margin, which has allowed for the implementation of
      the Conservation Incentive Program (CIP). The CIP allows NJNG to promote
      conservation programs to its customers while maintaining protection of its
      utility gross margin associated with reduced customer usage. CIP usage
      differences are calculated annually and are recovered one year following
      the end of the CIP usage year;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Managing
      its customer growth, which is expected to range from 1.6 to 1.8 percent
      annually;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Generating
      earnings from various BPU-authorized gross margin-sharing incentive
      programs; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Managing
      the volatility of wholesale natural gas prices through a hedging program
      designed to keep customers&#8217; prices as stable as
  possible.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
conducting NJNG&#8217;s business, management focuses on factors it believes may have
significant influence on its future financial results. NJNG&#8217;s policy is to work
with all stakeholders, including customers, regulators and policymakers, to
achieve favorable results. These factors include the rate of NJNG&#8217;s customer
growth in its service territory, which can be influenced by general economic
conditions as well as political and regulatory policies that may impact the new
housing market. A portion of NJNG&#8217;s customer growth comes from the conversion
market, which is influenced by the delivered cost of natural gas compared with
competing fuels, interest rates and other economic conditions.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
CIP pilot program was implemented effective October 1, 2006 to allow NJNG to
recover utility gross margin variations related to both weather and customer
usage. Recovery of such margin variations is subject to additional conditions
including an earnings test, which includes a return on equity component of 10.5
percent, and an evaluation of Basic Gas Supply Service (BGSS)-related savings
achieved. An annual review of the CIP must be filed in June&#160;of each year,
coincident with NJNG&#8217;s annual BGSS filing. In October 2007, the BPU
provisionally approved NJNG&#8217;s initial CIP recovery rates, which are designed to
recover approximately $15.6 million of accrued margin amounts.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
conjunction with the CIP, NJNG is required to administer programs that promote
customer conservation efforts. As of December&#160;31, 2007 and
September&#160;30, 2007, the obligation to fund these conservation programs was
recorded at its present value of $1.2 million and $1.4 million, respectively on
the Condensed Consolidated Balance Sheets.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Prior
to fiscal 2007, the impact of weather was mitigated by a Weather Normalization
Clause (WNC), which was suspended with the commencement of the CIP. In October
2007, the BPU approved the full recovery of $8.1 million of previously deferred
amounts related to the WNC.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Energy Services
Segment</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
provides unregulated wholesale energy services, including base load natural gas,
peaking and balancing services, utilizing physical assets it controls through
natural gas pipeline transportation and storage contracts, as well as providing
asset management services to customers in states from the Gulf Coast and
Mid-continent regions to the Appalachian and Northeast regions and
Canada.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">23</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
incorporates the following elements to provide for growth, while focusing on
maintaining a low-risk operating and counterparty credit profile:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Providing
      natural gas portfolio management services to nonaffiliated utilities and
      electric generation facilities;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Leveraging
      transactions for the delivery of natural gas to customers by aggregating
      the natural gas commodity costs and transportation costs in order to
      minimize the total cost required to provide and deliver natural gas to
      NJRES&#8217; customers by identifying the lowest cost alternative with the
      natural gas supply, transportation availability and markets to which NJRES
      is able to access through its business footprint and contractual asset
      portfolio;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Identifying
      and benefiting from variations in pricing of natural gas transportation
      and storage assets due to location or timing differences of natural gas
      prices to generate gross margin; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Managing
      economic hedging programs that are designed to mitigate adverse market
      price fluctuations in natural gas transportation and storage
      commitments.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
views &#8220;financial margin&#8221; as its key financial measurement metric. NJRES&#8217;
financial margin represents revenues earned from the sale of natural gas less
costs of natural gas sold, transportation and storage, and excludes any
accounting impact from the change in fair value of derivative instruments
designed to hedge the economic impact of its transactions that have not been
settled, which represent unrealized gains and losses, and realized gains and
losses associated with financial instruments economically hedging natural gas in
storage and not yet sold.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
has built a portfolio of customers including local distribution companies,
industrial companies, electric generators and retail aggregators. Sales to these
customers have allowed NJRES to leverage its transportation and storage capacity
and manage sales to these customers in an aggregate fashion. This strategy
allows NJRES to extract more value from its portfolio of natural gas storage and
pipeline transportation capacity through the arbitrage of pricing differences as
a result of locational differences or over different periods of
time.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
also focuses on creating value from underutilized natural gas assets, which are
typically amassed through contractual rights to natural gas transportation and
storage capacity. NJRES has developed a portfolio of natural gas storage and
transportation capacity in states in the Northeast, Gulf Coast, Mid-continent
and Appalachian regions and eastern Canada. These assets become more valuable
when prices change between these areas and across time periods. NJRES seeks to
optimize this process on a daily basis as market conditions change by evaluating
all the natural gas supplies, transportation and opportunities to which it has
access, to find the most profitable alternative to serve its various
commitments. This enables NJRES to capture geographic pricing differences across
these various regions as delivered natural gas prices change as a result of
market conditions. NJRES focuses on earning a financial margin on a single
original transaction and then utilizing that transaction, and the changes in
prices across the regions or across time periods, as the basis to further
improve the initial result.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
a similar manner, NJRES participates in natural gas storage transactions where
it seeks to identify pricing differences that occur over time, as prices for
future delivery periods at many different delivery points, are readily
available. For example, NJRES generates financial margin by locking in the
differential between purchasing natural gas at a low current or future price
and, in a related transaction, selling that natural gas at a higher current or
future price, all within the constraints of its credit and contracts policies.
Through the use of transportation and storage services, NJRES is able to
generate financial margin through pricing differences that occur over the
duration of time the assets are held.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES&#8217;
portfolio management customers include nonaffiliated utilities and electric
generation plants. Services provided by NJRES include optimization of
underutilized natural gas assets and basic gas supply functions.</font></div>
    <div><br></div>
    <div>
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        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">24</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
also participates in park-and-loan transactions with pipeline counterparties,
where NJRES will borrow natural gas when there is an opportunity to capture
arbitrage value. In these cases, NJRES evaluates the economics of the
transaction to determine if it can capture pricing differentials in the
marketplace in order to be able to generate&#160;financial margin. In evaluating
these transactions NJRES will compare the fixed fee it will pay and the
resulting spread it can generate when considering the amount it will receive to
sell the borrowed gas to another counterparty in relation to the cost it will
incur to purchase the gas at a later date for return back to the pipeline. When
the transaction allows NJRES to generate a financial margin, NJRES will fix the
financial margin by economically hedging the transaction with natural gas
futures.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
conducting its business, NJRES mitigates risk by following formal risk
management guidelines, including trading limits, approval processes, segregation
of duties, and formal contract and credit review and approval procedures. NJRES
continuously monitors and seeks to reduce the risk associated with various
counterparties credit exposure. The Risk Management Committee (RMC) of NJR,
oversees compliance with these established guidelines.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Retail and Other
Segment</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
the Retail and Other segment, NJR utilizes a subsidiary, NJR Energy Holdings, to
develop its investments in natural gas &#8220;mid-stream&#8221; assets. Mid-stream assets
represent natural gas transportation and storage facilities. NJR believes that
acquiring, owning and developing these mid-stream assets, which generally have a
regulated rate or tariff structure, can provide a significant growth opportunity
for the Company. To that end, NJR has acquired an interest in Iroquois and
Steckman Ridge, which is currently under development, and is actively pursuing
other potential opportunities that meet its investment and development criteria.
Other businesses in the Retail and Other segment include NJRHS, which provides
service, sales and installation of appliances to over 149,000 customers, and is
focused on growing its installation business and expanding its service contract
customer base, and CR&amp;R, which seeks additional opportunities to enhance the
value of its undeveloped land.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
financial results of Retail and Other consist primarily of the operating results
of NJRHS and equity in earnings attributable to the Company&#8217;s equity investment
in Iroquois as well as to investments made by NJR Energy, an investor in other
energy-related ventures through its operating subsidiaries.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
of December 31, 2007, excluding capitalized interest and other direct costs, NJR
has invested $58 million in the Steckman Ridge natural gas storage facility.
Project costs related to the development of the storage facility are expected to
be approximately $250 million of which NJR is responsible for 50 percent, or
$125 million. NJR anticipates that Steckman Ridge will be able to secure
non-recourse financing for a portion of the construction and development of its
facilities, thereby potentially reducing the expected funding obligation of NJR.
There can be no assurances that such non-recourse project financing will be
secured or available for Steckman Ridge.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Critical Accounting
Policies</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">A
summary of NJR&#8217;s critical accounting policies is included in <font style="DISPLAY: inline; FONT-STYLE: italic">Item 7. Management&#8217;s Discussion and
Analysis of Financial Condition and Results of Operations</font> of its Annual
Report on Form 10-K for the period ended September 30, 2007. NJR&#8217;s critical
accounting policies have not changed materially from those reported in the 2007
Annual Report on Form 10-K with the exception of the following:</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Derivative Instrument<font style="DISPLAY: inline; FONT-WEIGHT: bold">s</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Derivative
activities are recorded in accordance with SFAS No.&#160;133, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Derivative
Instruments and Hedging Activities,</font> as amended (SFAS 133), under which
NJR records the fair value of derivatives held as assets and liabilities. NJR&#8217;s
unregulated subsidiaries record changes in the fair value of its derivative
instruments in Gas purchases or Operating revenues, as appropriate, on the
Condensed Consolidated Statements of Income.&#160;</font></div>
    <div><br></div>
    <div><br></div>
    <div>
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        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
providing its unregulated wholesale energy services, NJRES also enters into
physical contracts to buy and sell natural gas. For contracts entered into prior
to October 1, 2007, NJRES elected to use the &#8220;normal purchase normal sale&#8221; scope
exception (NPNS or normal) under SFAS 133 since the contracts provided for the
purchase or sale of natural gas with the intention of delivering the natural gas
in quantities expected to be used or sold by NJRES over a reasonable period of
time in the normal course of its business. The Company continues to believe that
the conditions that originally qualified these contracts as normal continue to
exist, and, accordingly, NJRES will record the related liabilities incurred and
assets acquired under these remaining contracts when title to the underlying
natural gas commodity passes under accrual based accounting.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Effective
October 1, 2007, the Company has decided to discontinue using the NPNS exception
for any new physical commodity contracts entered into by NJRES. The criteria for
designating contracts as normal includes an assessment of the probability of
delivery at inception while considering certain factors such as expected future
demand. NJRES will continue to enter into these contracts with the intention of
physically delivering the natural gas; however, NJRES has determined that the
probability of net settling these contracts for cash may be greater than had
previously been experienced. As a result, commencing with contracts entered into
subsequent to September 30, 2007, NJRES will treat these contracts as
derivatives and record them at fair value in the Condensed Consolidated Balance
Sheet, with changes in fair value being recorded as a component of Operating
revenues in the Condensed Consolidated Statements of Income.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Capitalized Financing
Costs</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
capitalizes an allowance for funds used during construction (AFUDC), as a
component of Utility plant in the Condensed Consolidated Balance Sheets.
Commencing October 1, 2007, in addition to cost of debt, AFUDC also includes the
estimated cost of equity funds used to finance construction on its natural gas
transmission and distribution system, which is currently established through
allowed rates at 11.5 percent. The debt portion of AFUDC is recorded as a
reduction to Interest expense and the equity portion is recorded in Other income
in the Condensed Consolidated Statements of Income. Under regulatory rate
practices and in accordance with SFAS No. 71, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for the Effects of
Certain Types of Regulation</font>, NJNG fully recovers both components of AFUDC
through base rates.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Recently Issued Accounting
Standards</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Refer
to <font style="DISPLAY: inline; FONT-STYLE: italic">Note 1. General</font>, for
discussion of recently issued accounting standards.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Results of
Operations</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Consolidated</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Net
income for the three-month period ended December 31, 2007 increased by 2.6
percent to approximately $30.2 million, compared with net income of
approximately $29.4 million for the same period in fiscal 2007. Basic and
diluted earnings per share increased by 2.8 percent to $1.09 and $1.08, compared
with $1.06 and $1.05, respectively.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
increase in net income was due primarily to the following:</font></div>
    <div><br></div>
    <div>
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          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">increased
      gross margin and lower interest expense at NJRES due to decreased
      short-term debt levels used to fund natural gas storage purchases for
      inventory;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
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        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="81%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">lower
      unrealized losses at NJR Energy as a result of fluctuations in market
      prices and mix of open financial positions economically hedging forecasted
      natural gas purchases and sales; partially offset by</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">lower
      gross margin from incentive-based programs and increased operation and
      maintenance expense at NJNG.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company&#8217;s Operating revenues and Gas purchases are as follows:</font></div>
    <div><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="65%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="10" valign="bottom" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">($ in
      Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">% Change</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      revenues</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">811,138</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">737,401</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">10.0</font></td>
            <td align="left" nowrap valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="65%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
      purchases</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">684,694</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="3%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">621,935</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">10.1</font></td>
            <td align="left" nowrap valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Operating
revenues increased $73.7 million for the three months ended December 31, 2007,
compared with the same period of the prior fiscal year due primarily
to:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">increased
      NJNG firm sales as a result of it being 13.4 percent colder than the same
      period of the prior fiscal year, and lower BGSS customer refunds provided
      to residential and small commercial customers in fiscal 2008 compared to
      fiscal 2007; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">increased
      revenues at NJRES due to higher sales volumes and prices, along with the
      commencement of including the change in fair value of physical commodity
      contracts beginning in fiscal 2008.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">These
same factors resulted in an increase in Gas purchases of $62.8 million for the
three months ended December 31, 2007, as compared to the same periods in the
prior fiscal year, which includes the impact of a decrease of $19 million in
unrealized gains at NJRES that resulted in increased gas purchases.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Natural Gas Distribution
Operations</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
is a local natural gas distribution company that provides regulated retail
energy services to approximately 481,000 residential and commercial customers in
central and northern New Jersey and participates in the off-system sales and
capacity release markets.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
business is seasonal by nature, as weather conditions directly influence the
volume of natural gas delivered. Specifically, customer demand substantially
increases during the winter months when natural gas is used for heating
purposes. As a result, NJNG receives most of its gas distribution revenues
during the first and second fiscal quarters and is subject to variations in
earnings and working capital during the year.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Electric Discount and Energy Competition Act (EDECA) provides the framework for
New Jersey&#8217;s energy markets, which are open to competition from other energy
suppliers. Currently, NJNG&#8217;s residential markets are open to competition, and
its rates are segregated between BGSS (natural gas commodity) and delivery
(i.e., transportation) components. NJNG earns no utility gross margin on the
commodity portion of its natural gas sales. NJNG earns utility gross margin
through the delivery of natural gas to its customers. Under an existing order
from the BPU, BGSS can be provided by suppliers other than the state&#8217;s natural
gas utilities.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">27</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="81%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
financial results are as follows:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Utility
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            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">239,407</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Less:</font></div>
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">150,993</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">16,363</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">12,520</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
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            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">12,165</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">9,466</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      Utility Gross Margin</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">65,684</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">66,428</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Utility
      Gross Margin</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Residential
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">59,196</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">58,368</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Transportation</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4,934</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">4,566</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
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            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">64,130</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">216</font></div>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Depreciation
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
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            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">719</font></div>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
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            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="justify" valign="bottom" width="76%">
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Income
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            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
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              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">12,462</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      Income</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">16,670</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">19,908</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Utility Gross
Margin</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
utility gross margin is defined as natural gas revenues less natural gas
purchases, sales tax, a Transitional Energy Facilities Assessment (TEFA) and
regulatory rider expenses. Management believes that utility gross margin
provides a more meaningful basis than revenue for evaluating utility operations
since natural gas costs, sales tax, TEFA and regulatory rider expenses are
included in operating revenue and passed through to customers and, therefore,
have no effect on utility gross margin. This definition of utility gross margin
may not be comparable to the definition of gross margin used by others in the
natural gas distribution business and other industries.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Natural
gas costs are charged to operating expenses on the basis of therm sales at the
prices in NJNG&#8217;s BGSS tariff approved by the BPU. The BGSS tariff rate includes
projected natural gas costs, net of supplier refunds, the impact of hedging
activities and credits from non-firm sales and transportation activities. Any
underrecoveries or overrecoveries from the projected amounts are deferred and
reflected in the BGSS tariff rate in subsequent years.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">TEFA,
which is included in Energy and other taxes on the Condensed Consolidated
Statements of Income, is calculated on a per-therm basis and excludes sales to
cogeneration facilities, other utilities and off-system sales. TEFA represents a
regulatory allowed assessment imposed on all energy providers in the state of
New Jersey, as TEFA has replaced the previously used utility gross receipts tax
formula.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Regulatory
rider expenses consist of recovery of state-mandated programs and the
remediation adjustment clause costs. These expenses are offset by corresponding
revenues and are calculated on a per-therm basis.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">28</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="81%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
Operating revenues and Gas purchases for the three months ended December 31,
2007 increased $45.0 million, and $39.2&#160;million, respectively, compared
with the same period in the prior fiscal year due primarily to weather being
13.4 percent colder than the same period in the prior fiscal year. The increase
in Operating revenues and Gas purchases was also affected by the BGSS customer
refunds provided to residential and small commercial customers of $32.1 million
and $55.1 million, inclusive of sales tax refunds of $2.1 million and $3.6
million, in December 2007 and December 2006, respectively. In both fiscal years,
these customer refunds were the result of anticipated reductions in the cost to
acquire wholesale natural gas, as compared to the current established rate
included in NJNG&#8217;s BGSS tariff.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Sales
tax and TEFA, which are presented as both components of Revenues and Operating
Expenses in the Condensed Consolidated Statements of Income, totaled $16.4
million and $12.5 million for the three months ended December 31, 2007 and 2006,
respectively. The increase is due primarily to an increase in operating revenue
from firm sales of $42 million for the three months ended December 31,
2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Regulatory
rider expenses totaled $12.2 million and $9.5 million for the three months ended
December 31, 2007 and 2006, respectively. The increase in regulatory rider
expenses is due primarily to an increase in firm throughput of 2.4 Bcf for the
three months ended December 31, 2007 as compared to the three months ended
December 31, 2006, which was due primarily to an increase in usage as a result
of the previously mentioned colder weather.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Utility
gross margin is comprised of three major categories:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Utility
      Firm Gross Margin, which is derived from residential and commercial
      customers who receive natural gas service from NJNG through either sales
      or transportation tariffs;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Incentive
      programs, where margins generated or savings achieved from BPU-approved
      off-system sales, capacity release, Financial Risk Management (defined in
      Incentive Programs, below) or storage incentive programs are shared
      between customers and NJNG; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Utility
      gross margin from interruptible customers, which is generated from large
      commercial and industrial customers who receive non-firm natural gas
      service at lower rates, and is subject to BPU-approved incentives through
      October 31, 2007.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Utility Firm Gross
Margin</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Effective
October 1, 2006, the BPU approved the CIP to encourage energy savings while
allowing NJNG to recover the necessary costs of operations. The three-year pilot
program eliminates the disincentive to promote conservation and energy
efficiency, since utility gross margin is no longer directly linked to customer
usage. The CIP tariff normalizes NJNG&#8217;s utility gross margin recoveries for
variances not only in weather but also other factors affecting usage, including
customer conservation. Recovery of utility gross margin for the non-weather
variance through the CIP is limited to the amount of certain gas supply cost
savings achieved, and is subject to an earnings test, which contains a return on
equity component of 10.5 percent.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Customers
switching between sales service and transportation service affect the components
of utility gross margin from firm customers. NJNG&#8217;s total utility gross margin
is not negatively affected by customers who use its transportation service and
purchase natural gas from another supplier because its tariff is designed so
that no profit is earned on the commodity portion of sales to firm customers.
All customers who purchase natural gas from another supplier continue to use
NJNG for transportation service.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">29</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Total
utility firm gross margin increased $1.2 million, or 1.9 percent, for the three
months ended December 31, 2007, as compared to the same period in the prior
fiscal year, due primarily to an increase in residential customers along with a
slight increase in transport customer margin. Gross margin from the commercial
customers remained relatively consistent with the same period in the prior
fiscal year.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
weather for the three months ended December 31, 2007 was 8.2 percent warmer than
normal, which resulted in an accrual of utility gross margin under the CIP of
$2.9 million, compared with 18.3 percent warmer than normal weather for the same
period last fiscal year, which resulted in an accrual of utility gross margin of
$8.0 million. <font style="DISPLAY: inline; FONT-FAMILY: Dutch801 Rm BT, serif">In addition,
customer usage was lower than the established benchmark</font><font style="DISPLAY: inline; FONT-FAMILY: Dutch801 Rm BT, serif"> during fiscal
2008</font><font style="DISPLAY: inline; FONT-FAMILY: Dutch801 Rm BT, serif">,
which resulted in an additional accrual of utility gross margin under the CIP of
$</font><font style="DISPLAY: inline; FONT-FAMILY: Dutch801 Rm BT, serif">3.2</font><font style="DISPLAY: inline; FONT-FAMILY: Dutch801 Rm BT, serif"> million</font><font style="DISPLAY: inline; FONT-FAMILY: Dutch801 Rm BT, serif"> compared to $3.3
million in fiscal 2007</font><font style="DISPLAY: inline; FONT-FAMILY: Dutch801 Rm BT, serif">.
</font></font></div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">For
the period ended December 31, 2007, NJNG had 9,324 and 8,551 residential
customers and 4,889 and 4,319 commercial customers using its transportation
service at December 31, 2007 and 2006, respectively. The increase in
transportation customers for the period ended December 31, 2007 was due
primarily to an increase in marketing activity by third party natural gas
service providers in NJNG&#8217;s service territory.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Utility
firm gross margin from transportation service remained relatively flat at $4.9
million for the three months ended December 31, 2007, as compared to 4.6 million
for the three months ended December 31, 2006. NJNG transported 2.8 Bcf for its
firm customers in the three months ended December 31, 2007, compared with 2.5
Bcf for the same period ended December 31, 2006.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
added, in total, 1,723 and 2,614 new customers during the three months ended
December 31, 2007 and 2006, respectively. In addition, NJNG converted 104 and 69
existing customers to natural gas heat and other services during the same
periods for fiscal 2008 and 2007, respectively. This customer growth represents
an estimated annual increase of approximately 0.24 Bcf in sales to firm
customers, assuming normal weather and usage.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Incentive
Programs</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">To
reduce the overall cost of its natural gas supply commitments, NJNG has entered
into contracts to sell natural gas to wholesale customers outside its franchise
territory when the natural gas is not needed for system requirements. These
off-system sales enable NJNG to spread its fixed demand costs, which are charged
by pipelines to access their supplies year round, over a larger and more diverse
customer base. NJNG also participates in the capacity release market on the
interstate pipeline network when the capacity is not needed for its firm system
requirements. NJNG retains 15 percent of the utility gross margin from these
sales, with 85 percent credited to firm customers through the BGSS.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Financial Risk Management (FRM) program is designed to provide price stability
to NJNG&#8217;s natural gas supply portfolio. The FRM program includes an incentive
mechanism designed to encourage the use of financial instruments to hedge NJNG&#8217;s
natural gas costs. As of November 1, 2007, NJNG retains 15 percent of the
utility gross margin, with 85 percent credited to firm customers through the
BGSS. Previously, NJNG customers were credited 80 percent and NJNG retained 20
percent of the gains and losses.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
storage incentive program shares gains and losses on an 80 percent and 20
percent basis between customers and NJNG, respectively. This program measures
the difference between the actual cost of natural gas injected into storage and
a benchmark applicable to the April-through-October injection
season.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
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        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">30</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
incentive programs totaled 9.7 Bcf and generated $1.4 million of utility gross
margin for the three months ended December 31, 2007, compared with 10.6 Bcf and
$3.3 million of utility gross margin during the same period last fiscal year.
Utility gross margin from incentive programs comprised 2.2 percent of total
utility gross margin at December 31, 2007 and 4.9 percent of total utility gross
margin for the same period in fiscal 2007, respectively. The decrease in utility
gross margin was due primarily to:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">a
      decrease in margin from the storage program as a result of timing
      variations of storage incentive transactions;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="73%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">a
      decrease in margin from the FRM program as a result of natural gas option
      spreads that were lower in the three months ended December 31, 2007 as
      compared with the three months ended December 31, 2006, coupled with
      slightly decreased volumes and a decrease in the sharing percentage;
      slightly offset by</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="73%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in higher average sales prices offset by a decrease in sales
      volumes, which resulted in a net increase in off system sales
      margin.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">New
York Mercantile Exchange (NYMEX) settlement prices for natural gas are a general
indication of the monthly market movements. NYMEX prices have increased by 6.2
percent to an average of $6.965/dth for the three months ended December 31,
2007, compared with $6.557/dth for the same period of the prior fiscal year,
while the average off-system price increased by 12 percent to an average of
$7.934/dth during the period ended December 31, 2007 compared to $7.083/dth in
the same period last fiscal year.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Interruptible Tariff
Revenues</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
serves 45 customers through interruptible sales and/or transportation tariffs.
Sales made under the interruptible sales tariff are priced on market-sensitive
energy parity rates. Although therms sold and transported to interruptible
customers represented 5.4 percent of total throughput for the three months ended
December 31, 2007, and 4.0 percent of the total throughput during the same
period last fiscal year, they accounted for less than 1 percent of the total
utility gross margin in each year due to the sharing formulas that govern these
sales through October 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Under
these formulas, NJNG retains 10 percent of the utility gross margin from
interruptible sales and 5 percent of the utility gross margin from
transportation sales, with 90 percent and 95 percent, respectively, credited to
firm sales customers through the BGSS. Interruptible sales were 0.7 Bcf and 0.2
Bcf for the three months ended December 31, 2007 and 2006, respectively. In
addition, NJNG transported 0.9 Bcf for each of the three months ended December
31, 2007 and 2006, respectively, for its interruptible customers. The agreement
with the BPU approved on October 3, 2007, included the termination of the
incentive programs related to interruptible sales, on-system interruptible
transportation and sales to certain electric generation facilities effective
November 1, 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Operation and Maintenance
Expense</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Operation
and maintenance expense increased $3.6 million, or 17.9 percent, during the
three months ended December 31, 2007, as compared with the same period last
fiscal year, due primarily to:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">higher
      compensation costs of $2.7 million due primarily to an increases in the
      number of employees and overtime labor as well as annual wage
      increases;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="73%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in the bad debt reserves of $229,000 as a result of an increase
      in operating revenue that result in a change in the nature of customer
      accounts receivable; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="73%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in materials and supplies expense of $329,000 due primarily to an
      increase in high pressure meter
relocations.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">31</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Operating
Income</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Operating
income decreased $5.1 million, or 13.9 percent, for the three months ended
December 31, 2007 as compared with the same period&#160;last fiscal year, due
primarily to:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">a
      decrease in margin from incentive programs of $1.9 million as discussed
      above;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="73%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in depreciation expense of $495,000, as a result of greater
      utility plant being placed into service; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="73%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in Operations and maintenance expense in the amount of $3.6
      million, as discussed above; partially offset by</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="73%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="73%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in firm margin in the amount of $1.2 million as discussed
      above.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Interest
Charges</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Interest
charges increased $726,000 for the three months ended December 31, 2007 compared
with the same period last fiscal year, due primarily to:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase in BGSS interest of $194,000 due to customers balances associated
      with overrecovered gas costs;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase of $119,000 in short-term interest due to higher average balances
      on short-term debt offset by lower average interest rates;
    and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">an
      increase of $217,000 associated with reduced amounts capitalized under
      NJNG&#8217;s new AFUDC accounting policy effective October 1, 2007. As a result
      of now including a cost of equity component in its AFUDC calculation, the
      amount of interest capitalized for AFUDC purposes is calculated using a
      lower basis, as compared with the prior period, thereby causing the
      increase in interest expense.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Net
Income</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Net
income decreased $3.2 million, or 16.3 percent, to $16.7 million from $19.9
million in the three months ended December 31, 2007 and 2006, respectively,
primarily as a result of lower operating income of $5.1 million, as described
above, offset by lower income tax expense of $2.4 million.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Energy Services
Operations</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
utilizes contractual assets that it controls for natural gas storage and
pipeline transportation to meet its various sale and delivery commitments to its
customers. NJRES purchases natural gas predominantly in the Gulf region of the
United States and Canada, and transports that gas, through the use of pipeline
contracts to which it has reserved capacity through the payment of a fixed
demand charge, to either storage facilities that it has reserved, primarily in
the Appalachian, Mid-Continent and Gulf regions of the United States and Canada
or directly to customers in various market areas including the Northeastern
region of the United States and eastern Canada.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
enters into contracts for delivery of physical natural gas and also enters into
derivative financial contracts at advantageous prices to establish an initial
financial margin for each of its forecasted transactions. Through the use of its
contracts for natural gas storage and pipeline capacity, NJRES is able to take
advantage of pricing differences between geographic locations, commonly referred
to as &#8220;locational spreads,&#8221; as well as over</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">32</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">different
time periods, for the delivery of natural gas to its customers, thereby
improving the initially established financial margin result. NJRES utilizes
financial futures, forwards and swap contracts to economically fix and protect
the cash flows surrounding these transactions.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Predominantly
all of NJRES&#8217; purchases and sales result in the physical delivery of natural
gas, and therefore, NJRES has elected the &#8220;normal purchase normal sale&#8221; scope
exception of SFAS No. 133, <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Derivative
Instruments and Hedging Activities</font>, as amended (SFAS 133), for all
physical commodity contracts entered into prior to October 1, 2007, under which
related liabilities incurred and assets acquired under these contracts are
recorded when title to the underlying commodity passes. For all physical
commodity contracts entered into subsequent to September 30, 2007, NJRES has
elected to not use the normal purchase normal sale scope exception of SFAS 133,
and records these physical commodity contracts at fair value on the Condensed
Consolidated Balance Sheets. All changes in the fair value of physical commodity
contracts entered into subsequent to October 1, 2007 are recorded as part of
Operating revenues in the Condensed Consolidated Statements of
Income.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
changes in fair value of NJRES&#8217; financial instruments, which are financial
futures, options, and swap contracts, are recognized in the Condensed
Consolidated Statements of Income, as a component of Gas purchases.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;NJRES&#8217;
financial and physical contracts will result, over time, in earning a gross
margin on the entire transaction. For financial reporting purposes under GAAP,
the change in fair value associated with derivative instruments used to
economically hedge these transactions are recorded as a component of Operating
revenues or Gas purchases in the Condensed Consolidated Statements of Income, as
appropriate, during the duration of the financial instrument or commodity
contract. These changes in fair value are referred to as unrealized gains and
losses. In other instances, certain financial contracts designed to economically
fix or hedge the price of natural gas that is purchased and placed into storage,
to be sold at a later date, settle and result in realized gains, which are
recorded as a component of Gas purchases in the Condensed Consolidated
Statements of Income.</font></div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
unrealized gains or losses from the change in fair value of unsettled financial
instruments and physical commodity contracts, or realized gains or losses
related to financial instruments that economically hedge natural gas inventory
that has not been sold as part of a planned transaction, cause large variations
in the reported gross margin and earnings of NJRES. NJRES will continue to earn
the same amount of gross margin over the time period of the forecasted
transaction; however, gross margin or earnings during periods prior to
transaction settlement will not reflect the underlying economic
result.</font></div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
expenses its demand charges, which represent the right to use natural gas
pipeline and storage capacity assets of a third-party for a fixed period of
time, ratably over the term of the related natural gas pipeline or storage
contract.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES&#8217;
financial results are summarized as follows:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="18%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      revenues</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">520,211</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">495,787</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
      purchases</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">494,546</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">470,942</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gross
      margin</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">25,665</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">24,845</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operation
      and maintenance expense</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2,840</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">3,003</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Depreciation
      and amortization</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">53</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">54</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      taxes</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">209</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">192</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21,596</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">130</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">135</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Interest
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">877</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,711</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Income
      tax provision</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">8,666</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,496</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      income</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">13,150</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">11,524</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div><br></div>
    </div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">33</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div><br></div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Gross
margin for the three months ended December 31, 2007 remained relatively
consistent in comparison with the same period in the prior fiscal year. NJRES
incurred derivative losses of $(10.1) million and gains of $6.8 million for the
three months ended December 31, 2007 and 2006, respectively, due primarily to
fluctuations in market prices and portfolio mix of open trade positions that
reduced the unrealized portion of financial derivative gains from $8.0 million
in the prior fiscal year period to an unrealized loss of $(7.0) million in the
current fiscal year period. These losses on financial derivatives were partially
offset by the unrealized gains associated with the change in fair value of
physical commodity forward positions of $2.0 million, which commenced in fiscal
2008.</font></div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Additionally,
management of the Company uses non-GAAP measures when viewing the results of
NJRES to monitor the operational results without the impact of unsettled and
certain settled derivative instruments. These non-GAAP measures are &#8220;financial
margin&#8221; and &#8220;net financial earnings.&#8221;</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Financial
margin represents Operating revenues from the sale of natural gas less Gas
purchases, and excludes the accounting impacts of unrealized gains and losses
from derivative instruments and realized gains and losses of certain derivative
instruments related to natural gas inventory. These accounting impacts represent
the change in fair value of these financial instruments, which represent futures
and swaps designed to economically hedge forecasted natural gas purchases, sales
and transportation, and are primarily open positions resulting in unrealized
gains or losses and settled derivative positions related to natural gas that is
still included in inventory storage. These settled instruments represent
realized gains and losses under GAAP, but result in economically hedging the
ultimate sale of natural gas. In addition, all of NJRES&#8217; physical commodity
contracts entered into after September 30, 2007 are being accounted for as
derivatives, with the change in fair value recorded as an unrealized gain or
loss under GAAP. Net financial earnings represent Net income excluding the
accounting impacts of unrealized and realized gains and losses from these
derivative instruments, after taxes.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
revenues from the sale of natural gas to its customers, on a wholesale basis,
are highly correlated to the wholesale price of natural gas and the economic
impact of its derivative instruments will be substantially the same as the
accounting results under GAAP upon transaction settlement, management of the
Company believes that the net financial margin and net financial earnings
measurements represent the economic results of operations of NJRES. While
significant volatility is measured on a GAAP basis the ultimate impact of the
transaction will yield the same cash flow and economic result upon settlement of
the derivative instrument and completion of the forecasted transaction. In
viewing the financial margin and net financial earnings of NJRES, management of
the Company reviews the results of operations without this volatility to measure
the economic impact that NJRES&#160;achieved in relation to established
benchmarks and goals.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following table is a computation of Financial margin of NJRES:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      revenues</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">520,211</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">495,787</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
      purchases</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">470,942</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Add:</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
      loss (gain) on derivative instruments</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4,922</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(8,039</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Realized
      loss from derivative instruments related to natural gas
      inventory</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5,163</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,289</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Financial
      margin</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">35,750</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">18,095</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">34</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">A
reconciliation of Operating income, the closest GAAP financial
measurement,&#160;to the Financial margin of NJRES&#160;is as
follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      income</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">22,563</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21,596</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Add:</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operation
      and maintenance expense</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2,840</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">3,003</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Depreciation
      and amortization</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">53</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">54</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      taxes</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">209</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">192</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Subtotal
      &#8211; Gross margin</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">25,665</font></font></div>
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            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">24,845</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Add:</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
      loss (gain) on derivative instruments</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4,922</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(8,039</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Realized
      loss from derivative instruments related to natural gas
      inventory</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5,163</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,289</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Financial
      margin</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">35,750</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">18,095</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">A
reconciliation of Net income to Net financial earnings is as
follows:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      income (loss)</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">13,150</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">11,524</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Add:</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Unrealized
      loss (gain) on derivative instruments, net of taxes</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2,900</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(4,464</font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Realized
      loss from derivative instruments related to natural gas
      inventory,</font></div>
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            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
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            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">759</font></div>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      financial earnings</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
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            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">7,819</font></div>
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            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES'
financial margin for the three months ended December 31, 2007 increased $17.7
million, compared with the same period in prior fiscal year, due primarily to
increased availability of capacity assets in the Northeast market region. The
additional capacity enabled NJRES to transport higher volumes of natural gas to
the Northeast region during the current winter season, when these capacity
assets have a greater market value and correspondingly higher locational spread,
than in the summer season when demand for natural gas is typically lower. The
increase in financial margin was also partially attributable to colder weather
in the Northeast and Mid-Continent regions of the U.S., when compared to the
same period in the prior fiscal year, which resulted in higher demand levels for
natural gas, and enabled NJRES to actively participate in the supply of natural
gas to those regions through transaction activities that optimized the value of
the existing portfolio of physical assets.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES&#8217;
operation and maintenance expense decreased $163,000, during the three months
ended December 31, 2007, compared with the same period last fiscal year, due
primarily to timing of adjustments related to performance incentives, partially
offset by additional shared corporate service costs.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Future
results are subject to NJRES&#8217; ability to maintain and expand its wholesale
marketing activities and are contingent upon many other factors, including an
adequate number of appropriate counterparties, volatility in the natural gas
market, sufficient liquidity in the energy trading market and continued access
to the capital markets.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">35</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Retail and Other
Operations</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
consolidated financial results of Retail and Other are summarized as
follows:</font></div>
    <div><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="6" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Three Months
      Ended</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
    31,</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2006</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      revenues</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">6,631</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2,276</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Operation
      and maintenance expense</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5,460</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">5,058</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      income</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">166</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">114</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Equity
      in earnings, net of tax</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">424</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">417</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      income (loss)</font></div>
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            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font></font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">365</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(1,998</font></td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
Energy has an economic hedge associated with a long-term fixed-price contract to
sell gas to a counterparty. Unrealized losses or gains at NJR Energy are the
result of the change in value associated with derivative financial instruments
(futures contracts) designed to economically hedge the long-term fixed-price
contract.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
results of operations include unrealized (losses) associated with these
derivative instruments of $(305,000) and $(4.1) million for the three months
ended December 31, 2007 and 2006, respectively, which are recorded, pre-tax, as
a component of Operating revenues. On an after-tax basis, these unrealized
(losses) are $(180,000) and $(2.4) million for the three months ended December
31, 2007 and 2006, respectively.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Operating
revenue for the three months ended December 31, 2007 increased $4.4 million due
primarily to lower unrealized losses at NJR Energy, which are the result of a
combination of the partial settlement of these futures contracts, partially
offset by an increase in value of the futures contracts in relation to changing
market conditions.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Operation
and maintenance expenses for the three months ended December 31, 2007 increased
$402,000 due to higher compensation costs due primarily to an increase in the
number of employees as well as annual wage increases.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Other
income for the three months ended December 31, 2007 remained consistent as
compared to the same period in fiscal 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Taxes
netted in Equity in earnings from Iroquois are $282,000 and $276,000 and are
included in the Condensed Consolidated Statements of Income for the three months
ended December 31, 2007 and 2006, respectively. Equity in earnings from Iroquois
is driven by the underlying performance of natural gas transportation through
its existing pipeline, which is based on FERC regulated tariffs.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Net
income for the three months ended December 31, 2007 increased $2.4 million
compared to the same period in fiscal 2007 due primarily the reasons noted
above.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Liquidity and Capital
Resources</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR&#8217;s
objective is to maintain a consolidated capital structure that reflects the
different characteristics of each business segment and provides adequate
financial flexibility for accessing capital markets as required.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">36</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR&#8217;s
consolidated capital structure was as follows:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December 31,</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">September
      30,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="3" valign="bottom" width="12%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Common
      stock equity</font></div>
            </td>
            <td align="right" valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">49</font></font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></td>
            <td align="right" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">50</font></td>
            <td align="left" nowrap valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Long-term
      debt</font></div>
            </td>
            <td align="right" valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">27</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">30</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Short-term
      debt</font></div>
            </td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">24</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">20</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="72%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font></font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">100</font></font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">%</font></font></td>
            <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">100</font></td>
            <td align="left" nowrap valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Common stock
equity</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
satisfies its external common equity requirements, if any, through issuances of
its common stock, including the proceeds from stock issuances under its
Automatic Dividend Reinvestment Plan (DRP) and proceeds from the exercise of
options issued under the Company&#8217;s long-term incentive program. The DRP allows
NJR, at its option, to use shares purchased on the open market or newly issued
shares.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
of December 31, 2007, the Company had a 4.5 million share repurchase plan that
has been approved by its Board of Directors and has repurchased approximately
3.5 million shares under this plan.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Debt</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
and its unregulated subsidiaries rely on cash flows generated from operating
activities and utilization of committed credit facilities to provide liquidity
to meet working capital and external debt-financing requirements.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
of December 31, 2007, NJR, NJRES and NJNG had committed credit facilities of
$605 million with approximately $289 million available under these facilities
(see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 6.
Debt).</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
believes that as of December 31, 2007, NJR, NJNG and NJRES were, and currently
are, in compliance with all debt covenants.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
believes that existing borrowing availability, its current cash balances and its
cash flow from operations will be sufficient to satisfy it and its subsidiaries&#8217;
working capital, capital expenditure and dividend requirements for the
foreseeable future. NJR, NJNG and NJRES currently anticipate that its financing
requirements in fiscal 2008 and 2009 will be met through the issuance of
short-term and long-term debt and proceeds from the Company&#8217;s Automatic Dividend
Reinvestment Plan. The proposed issuance of up to $125 million of medium-term
debt to satisfy a portion of NJNG&#8217;s financing requirements is pending BPU review
and approval.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NJR</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">On
December 13, 2007, NJR refinanced its prior senior credit facility for a new
$325 million, five-year, revolving, unsecured credit facility. The new credit
facility permits the borrowing of amounts under a revolving basis, as well as
the issuance of letters of credit. It also permits an increase to the facility,
from time to time, with the existing or new lenders, in a minimum of $5 million
increments up to a maximum $100 million. The new credit facility refinances an
earlier credit facility that provided for $325 million in revolving credit that
was scheduled to expire on December 16, 2007. NJR used the initial borrowings
under the new credit facility to refinance its prior credit facility and pay all
related fees and expenses. The new credit facility permits the borrowing of
revolving loans and swingline loans, as well as the issuance of letters of
credit. In addition, NJR&#8217;s subsidiaries have guaranteed to the lenders all of
NJR&#8217;s obligations under the new credit facility.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">37</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Depending
on borrowing levels and credit ratings, NJR&#8217;s interest rate can either be, at
its discretion, the London inter-bank offered rate (&#8220;LIBOR&#8221;) or the Federal
Funds Open Rate plus an applicable spread and facility fee. As of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">December
31, 2007, NJR&#8217;s effective rate was 5.18&#160;percent&#160;on outstanding
borrowings of $92.6 million under this credit facility.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
addition, borrowings under NJR&#8217;s new credit facility are conditioned upon
compliance with a maximum leverage ratio, as defined in the new credit facility,
of not more than 0.65 to 1.00 at any time.</font></div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
uses its short term borrowings primarily to finance its share repurchases, to
satisfy NJRES&#8217; short term liquidity needs and to finance, on an initial basis,
unregulated investments. NJRES&#8217; use of high-injection, high-withdrawal storage
facilities and anticipated pipeline park-and-loan arrangements, combined with
related economic hedging activities in the volatile wholesale natural gas
market, create significant short-term cash requirements.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NJNG</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
satisfies its debt needs by issuing short- and long-term debt based upon its own
financial profile. The seasonal nature of NJNG&#8217;s operations creates large
short-term cash requirements, primarily to finance natural gas purchases and
customer accounts receivable. NJNG obtains working capital for these
requirements, and for the temporary financing of construction and MGP
remediation expenditures and energy tax payments, through the issuance of
commercial paper and short-term bank loans.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">To
support the issuance of commercial paper, NJNG has a $250 million committed
credit facility with several banks, with a 5-year term, expiring in December
2009. NJNG had $109.1 million of commercial paper borrowings supported by the
credit facility as of December 31, 2007, and $175.7 million of commercial paper
borrowings as of September 30, 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
has a 3-year, $30 million uncommitted credit facility with a multinational
financial institution. As of December 31, 2007, NJNG had borrowings of $6.3
million outstanding under this facility. Borrowings under this facility are in
addition to the amount available under the NJNG bank credit facility mentioned
above.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Neither
NJNG nor its assets are obligated or pledged to support the NJR or NJRES
facilities.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NJRES</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
has a 3-year $30 million committed credit facility with a multinational
financial institution. Borrowings under this facility are guaranteed by NJR.
There were no borrowings under this facility as of December 31,
2007.</font></div>
    <div><br></div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">38</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Contractual
Obligations</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following table is a summary of NJR, NJNG and NJRES contractual cash obligations
and financial commitments and their applicable payment due dates as of December
31, 2007.</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="34%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="9" valign="bottom" width="43%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Payments&#160;Due&#160;by&#160;Period</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="34%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Contractual&#160;Obligations</font></div>
            </td>
            <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Total</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Up&#160;to</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">1&#160;Year</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2-3</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Years</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">4-5</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Years</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">After</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">5&#160;Years</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Long-term
      debt <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)</font></font></font></font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$522,886</font></div>
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$45,754</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$71,349</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$23,748</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$382,035</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Capital
      lease obligations <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)</font></font></font></font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">91,418</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,813</font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">17,821</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">19,899</font></div>
            </td>
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            <td align="right" valign="bottom" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td align="right" valign="top" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="top" width="34%">
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            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Natural
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            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">91,093</font></div>
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            <td align="right" valign="top" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td align="left" valign="top" width="34%">
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            <td align="right" valign="bottom" width="8%">
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            <td align="right" valign="top" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="top" width="34%">
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            <td align="right" valign="bottom" width="8%">
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            <td align="right" valign="top" width="8%">
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            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="34%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Demand
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            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
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            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">92,001</font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">81,764</font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">33,104</font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="top" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">11,157</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="34%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      contractual cash obligations</font></div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$2,826,934</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$1,181,902</font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$746,464</font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$258,253</font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$640,315</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">&#160;(1)&#160;&#160;These
obligations include an interest component, as defined under the governing
agreements.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">&#160;(2)&#160;&#160;Expenditures
are estimated.</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
fiscal 2008, the Company has no minimum pension funding requirements. The
Company&#8217;s funding to its OPEB plans is expected to be approximately $1.5 million
in fiscal 2008 and $1.1 million annually, over the next four years. Additional
contributions may be made based on market conditions and various
assumptions.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
of December 31, 2007, there were NJR guarantees covering approximately $352
million of natural gas purchases and demand fee commitments of NJRES and NJNG,
included in natural gas supply purchase obligations above, not yet reflected in
Accounts payable on the Condensed Consolidated Balance Sheet.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company is obligated to fund up to $125 million associated with the construction
and development of Steckman Ridge. Currently, NJR anticipates that Steckman
Ridge will secure non-recourse project financing for a portion of its
construction activities and therefore potentially reduce NJR&#8217;s obligation. There
can be no assurances that Steckman Ridge will eventually secure such
non-recourse project financing.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Total
capital expenditures for fiscal 2008 are estimated at $78.6 million, including
expenditures of $13.5 million incurred during the three months ended December
31, 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Off-Balance-Sheet
Arrangements</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company does not have any off-balance-sheet financing arrangements.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Cash Flow</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Operating
Activities</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">As
presented in the Condensed Consolidated Statements of Cash Flows, cash flow used
in operations totaled $6.5 million for the three months ended December 31, 2007,
compared with cash flow from operations of $12.4 million for the same period in
fiscal 2007. Operating cash flows were primarily impacted by variations in
working capital, which are a function of the seasonality of NJR&#8217;s business and
fluctuations in wholesale natural gas prices.</font></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">39</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Changes
in working capital more than offset higher net income and deferred income taxes
during the first quarter of fiscal 2008. The components of working capital that
contributed to the decrease in operating cash flows for the three months ended
December 31, 2007 as compared to the same period in fiscal 2007 are as
follows:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">At
      NJNG, an increase in billed and unbilled accounts receivable of $48.9
      million as a result of colder weather and lower customer credits in fiscal
      2008 as compared to fiscal 2007; partially offset by</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">A
      decrease in inventory at NJNG as a result of increased usage during the
      heating season; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">A
      decrease in the change in gas purchases payable primarily at NJRES as a
      result of lower gas storage balances, partially offset by increased
      natural gas commodity prices.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
MGP expenditures are currently expected to total $19.1 million in fiscal 2008
(see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 12. Commitments and
Contingent Liabilities).</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Financing
Activities</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Cash
flow from financing activities totaled $23.1 million for the three months ended
December 31, 2007, compared with cash flows from financing activities of $5.3
million for the same period in the prior fiscal year. The change was due
primarily to an increase in short-term borrowings, which typically increase
during the winter and was impacted during the first quarter of fiscal 2008 by
the increased demand of natural gas as a result of the colder weather as
compared with the same period in fiscal 2007, offset by cash payments for
treasury stock of $10.1 million of which $7.7 million is for settled purchases
from the fourth quarter of fiscal 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
received $7.5 million in the three months ended December 31, 2007, in connection
with the sale-leaseback of its gas meters. This sale-leaseback program will
continue on an annual basis.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Investing
Activities</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Cash
flows used in investing activities totaled $17.9 million for the three months
ended December 31, 2007, compared with $12.5 million in the same period in
fiscal 2007. The increase was due primarily to an additional equity investment
in Steckman Ridge and increased capital expenditures for utility plant offset by
cash received from the sale of land at CR&amp;R in the first quarter of fiscal
2007 that did not recur in fiscal 2008.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Retail
and Other capital expenditures each year have been made primarily in connection
with investments made to preserve the value of real estate holdings. At December
31, 2007, CR&amp;R owned 83 acres of undeveloped land and a 56,400-square-foot
building on 5 acres of land.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR
is obligated to finance 50 percent of the acquisition and development costs of
the Steckman Ridge storage facility, up to a maximum of $125 million, of which
$58 million was expended through December 31, 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJR&#8217;s
investment in Steckman Ridge is a strategic investment to enter the mid-stream
natural gas business. This storage capacity will provide NJR the potential to
diversify is revenue stream through another market-based outlet that has a
consistent demand and a regulated tariff structure. NJR anticipates a portion of
Steckman Ridge to be financed on a non-recourse, or project, basis and for the
majority of its revenue to be secured by long-term contracts; however, there can
be no assurances that this will occur.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJRES
does not currently anticipate any significant capital expenditures in fiscal
2008.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">40</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div>&#160;</div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 2. MANAGEMENT&#8217;S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Credit Ratings</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
table below summarizes NJNG&#8217;s credit ratings issued by two rating entities,
Standard and Poor&#8217;s (S&amp;P) and Moody&#8217;s Investors Service,&#160;Inc. (Moody&#8217;s)
as of December 31, 2007:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="46%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="18%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Standard and
      Poor&#8217;s</font></font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Moody&#8217;s</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="46%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Corporate&#160;Rating</font></div>
            </td>
            <td valign="bottom" width="18%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">A+</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">N/A</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="46%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Commercial
      Paper</font></div>
            </td>
            <td valign="bottom" width="18%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">A-1</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">P-1</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="46%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Senior
      Secured</font></div>
            </td>
            <td valign="bottom" width="18%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">AA-</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Aa3</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="46%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Ratings
      Outlook</font></div>
            </td>
            <td valign="bottom" width="18%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Negative</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Stable</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
S&amp;P and Moody&#8217;s Senior Secured ratings are investment-grade ratings and
represent the sixth highest rating within the investment grade category. Moody&#8217;s
and S&amp;P give NJNG&#8217;s commercial paper the highest rating within the
Commercial Paper investment-grade category.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Investment-grade
ratings are generally divided into three groups: high, upper medium and medium.
NJNG&#8217;s senior secured ratings and the commercial paper ratings fall into the
high group. NJR is not a rated entity.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG
is not party to any lending agreements that would accelerate the maturity date
of any obligation caused by a failure to maintain any specific credit rating. A
rating set forth above is not a recommendation to buy, sell or hold the
Company&#8217;s or NJNG&#8217;s securities and may be subject to revision or withdrawal at
any time. Each rating set forth above should be evaluated independently of any
other rating.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
timing and mix of any external financings will target a common equity ratio that
is consistent with maintaining the Company&#8217;s current short- and long-term credit
ratings.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="QQ">ITEM 3.
      </a>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-STYLE: italic">Financial Risk
Management</font></font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Commodity Market
Risks</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Natural
gas is a nationally traded commodity, and its prices are determined effectively
by the New&#160;York Mercantile Exchange (NYMEX) and over-the-counter markets.
The prices on the NYMEX and over-the-counter markets generally reflect the
notional balance of natural gas supply and demand, but are also influenced
significantly from time to time by other events.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
regulated and unregulated natural gas businesses of the Company and its
subsidiaries are subject to market risk due to fluctuations, in the price of
natural gas. To economically hedge against such fluctuations, the Company and
its subsidiaries have entered into futures contracts, options agreements and
swap agreements. To manage these derivative instruments, the Company has
well-defined risk management policies and procedures that include daily
monitoring of volumetric limits and monetary guidelines. The Company&#8217;s natural
gas businesses are conducted through three of its operating subsidiaries. First,
NJNG is a regulated utility that uses futures, options and swaps to economically
hedge against price fluctuations and its recovery of natural gas costs is
governed by the BPU. Second, NJRES uses futures, options and swaps to
economically hedge purchases and sales of natural gas. Finally, NJR Energy has
entered into two swap transactions related to an 18-year fixed-price contract,
expiring in October 2010 to sell remaining volumes of approximately 6.7 Bcf of
natural gas (Gas Sales Contract) to an energy marketing
company.&#160;</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">41</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following table reflects the changes in the fair market value of financial
derivatives related to natural gas purchases and sales from December 31,
2007:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="29%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">&#160;(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Balance</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">September
      30,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Increase</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(Decrease) in
      Fair</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Market&#160;Value</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Less</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Amounts</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Settled</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Balance</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
31,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJNG</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(51,861</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(1,942</font></div>
            </td>
            <td align="left" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(8,449</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(45,354</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJRES</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">89,446</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(2,049</font></div>
            </td>
            <td align="left" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">7,820</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">79,577</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJR
      Energy</font></div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">28,353</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">623</font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">928</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">28,048</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="29%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      65,938</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(3,368</font></div>
            </td>
            <td align="left" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;299</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      62,271</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">There
were no changes in methods of valuations during the year ended December 31,
2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following is a summary of fair market value of financial derivatives related to
natural gas purchases and sales at December 31, 2007, by method of valuation and
by maturity for each fiscal year period:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="29%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2008</font></font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2009</font></font></div>
            </td>
            <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2010-2012</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">After</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2012</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Total</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Fair&#160;Value</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Price
      based on NYMEX</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$51,045</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$6,436</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(3,691</font></div>
            </td>
            <td align="left" valign="top" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$53,790</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Price
      based on other external data</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">5,908</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,865</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">708</font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,481</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$56,953</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$8,301</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$(2,983</font></div>
            </td>
            <td align="left" valign="top" width="1%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$62,271</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following is a summary of financial derivatives by type as of December 31,
2007:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="29%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Volume</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(Bcf)</font></font></div>
            </td>
            <td valign="bottom" width="16%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Price per</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Mmbtu</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Amounts
      included</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">in Derivatives
      </font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(Thousands)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJNG</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Futures</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">3.4</font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$6.93
      - $&#160;&#160;8.80</font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;5,726</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="29%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Swaps</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2.5</font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$4.19
      - $&#160;&#160;9.70</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(49,410</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="29%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Options</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">6.6</font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$7.25
      - $11.00</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;&#160;(1,670</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJRES</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Futures</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(6.6</font></div>
            </td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td valign="top" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$6.94
      - $11.59</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;&#160;&#160;4,880</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="29%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Swaps</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(93.6</font></div>
            </td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$6.74
      - $13.03</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;72,372</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="29%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Options</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">0.6</font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$6.75
      - $11.25</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;&#160;&#160;2,325</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJR
      Energy</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Swaps</font></div>
            </td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">7.2</font></div>
            </td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="16%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$3.22
      - $&#160;&#160;4.41</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;28,048</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="top" width="29%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="16%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$62,271</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following table reflects the changes in the fair market value of physical
commodity contracts from December 31, 2007:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="29%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Balance</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">September
      30,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Increase</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(Decrease) in
      Fair</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Market&#160;Value</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Less</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Amounts</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Settled</font></font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Balance</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December
31,</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">2007</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NJRES</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$5,615</font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$3,571</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      2,044</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company uses a value-at-risk (VaR) model to assess the market risk of its net
futures, options and swap positions. VaR represents the potential loss in value
of NJRES&#8217; trading portfolio due to adverse market movements over a defined time
horizon (NJRES utilizes holding periods of 1 day and 10 days) with a specified
confidence level (NJRES utilizes either a 95 percent or 99 percent confidence
level). As an example, utilizing a 1 day holding period with a 95 percent
confidence level would indicate that there is a 5 percent chance that the
liquidation value of the NJRES portfolio would fall below the expected trading
value by an amount at least as large as the calculated VaR.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">42</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
VaR at December 31, 2007, using the variance-covariance method with a 95 percent
confidence level and a 1-day holding period, was $500,000. The VaR with a 99
percent confidence level and a 10-day holding period was $2.3 million. The
calculated VaR represents an estimate of the potential change in the value of
the net positions. These estimates may not be indicative of actual results
because actual market fluctuations may differ from forecasted
fluctuations.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Wholesale Credit
Risk</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG,
NJRES and NJR Energy engage in wholesale marketing activities. NJR monitors and
manages the credit risk of its wholesale marketing operations through credit
policies and procedures that management believes reduce overall credit risk.
These policies include a review and evaluation of prospective counterparties&#8217;
financial statements and/or credit ratings, daily monitoring of counterparties&#8217;
credit limits, daily communication with traders regarding credit status and the
use of credit mitigation measures, such as minimum margin requirements,
collateral requirements and netting agreements. Examples of collateral include
letters of credit and cash received for either prepayment or margin
deposit.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company&#8217;s Risk Management Committee (RMC) continuously monitors NJR&#8217;s credit
risk management policies and procedures. The RMC is comprised of individuals
from NJR-affiliated companies that meet twice a month and, among other things,
evaluates the effectiveness of existing credit policies and procedures, reviews
material transactions and discusses emerging issues.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following is a summary of gross and net credit exposures, grouped by investment
and noninvestment grade counterparties, as of December 31, 2007. Gross credit
exposure is defined as the unrealized fair value of derivative and energy
trading contracts plus any outstanding receivable for the value of natural gas
delivered for which payment has not yet been received. Net credit exposure is
defined as gross credit exposure reduced by collateral received from
counterparties and/or payables, where netting agreements exist. The amounts
presented below exclude accounts receivable for retail natural gas sales and
services.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Unregulated
counterparty credit exposure as December 31, 2007, is as follows:</font></div>
    <div><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Gross&#160;Credit</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Exposure</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Net&#160;Credit</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Exposure</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Investment
      grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">294,237</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">204,835</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Noninvestment
      grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,368</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Internally
      rated investment grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">19,626</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">12,323</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Internally
      rated noninvestment grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">3,617</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">318,848</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">217,158</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NJNG&#8217;s
counterparty credit exposure as of December 31, 2007, is as
follows:</font></div>
    <div><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(Thousands)</font></font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Gross&#160;Credit</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Exposure</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="2" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Net&#160;Credit</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Exposure</font></font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Investment
      grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">31,331</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">18,556</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Noninvestment
      grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">567</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">4</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Internally
      rated investment grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">3,962</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">3,403</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Internally
      rated noninvestment grade</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">57</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="bottom" width="76%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">35,917</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21,963</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">43</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Due
to the inherent volatility in the prices of natural gas commodities and
derivatives, the market value of contractual positions with individual
counterparties could exceed established credit limits or collateral provided by
those counterparties. If a counterparty failed to perform the obligations under
its contract (for example, failed to deliver or pay for natural gas), then the
Company could sustain a loss. This loss would comprise the loss on natural gas
delivered but not paid for and/or the cost of replacing natural gas not
delivered at a price higher than the price in the original contract. Any such
loss could have a material impact on the Company&#8217;s financial condition, results
of operations or cash flows.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">Interest Rate Risk&#8211;Long-Term
Debt</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">At
December 31, 2007, the Company (excluding NJNG) had no variable-rate long-term
debt.</font></div>
    <div><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font id="TAB2" style="LETTER-SPACING: 8pt">&#160;&#160;&#160;</font>&#160;At December
31, 2007, NJNG had total variable-rate, tax-exempt long-term debt of $97.0
million. To limit its exposure to variable rates the company purchased interest
rate caps.&#160;These caps have a strike price of 4.5 percent, expire in July
2009 and reference the USD-BMA Municipal Index.</font></div><br><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic"><font id="TAB2" style="LETTER-SPACING: 8pt">&#160;&#160;&#160;</font>&#160;Effects of
Inflation</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Although
inflation rates have been relatively low to moderate in recent years, any change
in price levels has an effect on operating results due to the capital-intensive
and regulated nature of the Company&#8217;s utility subsidiary. The Company attempts
to minimize the effects of inflation through cost control, productivity
improvements and regulatory actions where appropriate.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="cont">ITEM 4.</a>
      CONTROLS AND PROCEDURES</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Disclosure Controls and
Procedures</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Under
the supervision and with the participation of the Company&#8217;s management,
including the principal executive officer and principal financial officer, the
Company conducted an evaluation of the effectiveness of the design and operation
of its disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e)) under the Exchange Act, as of the end of the period covered by this
report. Based on this evaluation, the Company&#8217;s principal executive officer and
principal financial officer concluded that, as of end of the period covered by
this report, the Company&#8217;s disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the SEC&#8217;s rules
and forms, and that such information is accumulated and communicated to the
Company&#8217;s management, including its principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
connection with the Company&#8217;s preparation of its consolidated financial
statements for the fiscal year ended September 30, 2007, the Company reassessed
its accounting treatment and disclosures for its derivative instruments under
Statement of Financial Accounting Standards 133 <font style="DISPLAY: inline; FONT-STYLE: italic">Accounting for Derivative
Instruments and Hedging Activities</font> (as interpreted and amended, &#8220;SFAS
133&#8221;). As a result of this accounting assessment, the Company determined that
certain of its derivative instruments have not qualified as cash flow hedges
under SFAS 133 as they did not meet the definition for &#8220;critical-terms-match,&#8221;
as defined under paragraph 65 of SFAS 133 and related authoritative accounting
literature issued by various standard setting bodies and their related
interpretations for all fiscal periods. As the Company has determined the
hedging relationships did not meet the &#8220;critical-terms-match,&#8221; the related
derivative instruments did not qualify as cash flow hedges and the unrealized
gains or losses on the derivative instruments are required to be reflected in
the Consolidated Statement of Income for each period rather than recorded in
Comprehensive Income and included as a component of &#8220;accumulated other
comprehensive</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">44</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
I</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 4. CONTROLS AND PROCEDURES
      (Continued)</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">income,&#8221;
a component of Total Common Stock Equity in the Consolidated Balance Sheets,
until the forecasted transaction is settled. Therefore, because of this material
weakness, the Company amended and restated certain of its historical
consolidated financial statements and made appropriate changes in the
preparation of its consolidated financial statements for the year ended
September 30, 2007, including the Condensed Consolidated Statements of Income
and of Cash flows for the three months ended December 31, 2006.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
Company continually reviews its disclosure controls and procedures and makes
changes, as necessary, to ensure the quality of its financial reporting. As
detailed below, the Company has implemented certain additional controls that it
believes will significantly reduce the potential for similar issues to arise in
the future.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Changes in Internal Control over
Financial Reporting</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Management
and the Board of Directors are committed to the remediation of the material
weakness set forth above as well as the continued improvement of the Company&#8217;s
overall system of internal control over financial reporting. Management is in
the process of actively addressing and remediating the material weakness in
internal control over financial reporting described above. During the quarter
ended December 31, 2007, in connection with the material weakness in internal
control over financial reporting detailed above, the Company implemented or is
in the process of implementing the following controls designed to substantially
reduce the risk of a similar material weakness occurring in the
future:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">improving
      training, education and accounting reviews for all relevant personnel
      involved in the accounting treatment and disclosures for the Company&#8217;s
      derivative instruments to ensure compliance with generally accepted
      accounting principles, including SFAS 133 and its related
      interpretations;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">ensuring
      the Company has the accounting technical expertise requirements necessary
      for compliance with SFAS 133;</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">initiating
      a thorough review of the design of the internal control over financial
      reporting related to the accounting of derivative instruments, which will
      incorporate an analysis of the current staffing levels, job assignments
      and the design of all internal control processes for the accounting for
      derivative instruments and implement new and improved processes and
      controls, if warranted; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="72%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td align="justify" valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">increasing
      the level of review and discussion of significant accounting matters and
      supporting documentation with senior finance
  management.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
addition, as part of the Company&#8217;s fiscal 2008 assessment of internal control
over financial reporting, management will conduct sufficient testing and
evaluation of the controls to be implemented as part of this remediation plan to
ascertain that they operate effectively. The Company anticipates that these
remediation actions represent ongoing improvement measures. While the Company
has taken steps to remediate the material weakness, these steps may not be
adequate to fully remediate the material weakness, and additional measures may
be required. The effectiveness of its remediation efforts will not be known
until the Company can test those controls in connection with the management
tests of internal control over financial reporting that the Company will perform
as of September 30, 2008. The Company believes, however, these measures will
fully remediate the above identified material weakness in its internal control
over financial reporting.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">These
were the only changes in the Company&#8217;s internal control over financial reporting
(as such term is defined in Exchange Act Rule 13a-15(f)) that occurred during
the quarter ended December 31, 2007, that have materially affected, or are
reasonably likely to materially affect, internal control over financial
reporting.</font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">45</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
II</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="legal">ITEM 1.</a> LEGAL
      <a name="pat2">PR</a>OCEEDINGS</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Information
regarding reportable legal proceedings is contained in Part I, "Item 3. Legal
Proceedings" in NJR&#8217;s Annual Report on Form 10-K for the year ended September
30, 2007, and is set forth in Part I, Item 1, Note 12, <font style="DISPLAY: inline; FONT-STYLE: italic">Commitment and Contingent
Liabilities&#8212;Legal Proceedings</font>. No legal proceedings became reportable
during the quarter ended December 31, 2007 and there have been no material
developments during such quarter regarding any previously reported legal
proceedings, which have not been previously disclosed.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 56pt; TEXT-INDENT: -57pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="risk">ITEM 1A</a>. RISK
      FACTORS</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Part
I, Item 1A, "Risk Factors," of NJR&#8217;s 2007 Annual Report on Form 10-K includes a
detailed discussion of NJR&#8217;s risk factors. There have been no changes to those
risk factors during the quarter ended December 31, 2007.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="unreg">ITEM 2.
      </a>UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
      PROCEEDS</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
1996, the NJR Board of Directors authorized the repurchase of up to 1 million of
the Company&#8217;s common shares. Since 1996, the repurchase plan has been expanded
several times. On November 14, 2007, the NJR Board of Directors authorized an
increase to the plan to permit the repurchase, in the open market or in
privately negotiated transactions, of 1 million shares, bringing the total
permitted repurchases to 4.5 million shares as of that date. As of December 31,
2007, the Company has 960,747 shares of its common stock still available for
repurchase.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">The
following table sets forth NJR&#8217;s repurchase activity for the quarter ended
December 31, 2007:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Period</font></font></div>
            </td>
            <td valign="bottom" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Total Number of
      Shares</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">(or Units) </font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Purchased</font></font></div>
            </td>
            <td valign="bottom" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Average Price Paid
      </font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">per Share</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;(or
      Unit)</font></font></div>
            </td>
            <td valign="bottom" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Total Number of Shares (or
      Units) </font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Purchased as Part of Publicly
      </font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Announced Plans or
      Programs</font></font></div>
            </td>
            <td valign="bottom" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Maximum Number (or Approximate
      Dollar Value) of Shares (or Units) That May Yet be Purchased Under the
      Plans or Programs</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">10/1/07
      &#8211; 10/31/07</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="right" valign="top" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="right" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="right" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,147</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">11/1/07
      &#8211; 11/30/07</font></div>
            </td>
            <td align="right" valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="right" valign="top" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="right" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,008,147
      <font style="DISPLAY: inline; FONT-SIZE: 7pt"><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)</font></font></font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="19%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">12/1/07
      &#8211; 12/31/07</font></div>
            </td>
            <td align="right" valign="top" width="17%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">47,400</font></div>
            </td>
            <td align="right" valign="top" width="19%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">50.082</font></div>
            </td>
            <td align="right" valign="top" width="25%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="right" valign="top" width="20%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">960,747</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="19%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td align="right" valign="top" width="17%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">47,400</font></div>
            </td>
            <td align="right" valign="top" width="19%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">50.082</font></div>
            </td>
            <td align="right" valign="top" width="25%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</font></div>
            </td>
            <td align="right" valign="top" width="20%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">960,747</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-STYLE: italic">(1)&#160;&#160;Includes 1 million
additional common shares approved to be repurchased by NJR Board of
Directors.</font></font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">46</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
II</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="subm">ITEM 4.</a>
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(a)</font></div>
            </td>
            <td align="justify" colspan="2" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">An
      annual meeting of shareholders was held on January&#160;23,
      2008.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="68%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(b)</font></div>
            </td>
            <td align="justify" colspan="2" valign="top" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">The
      shareholders voted upon the following matters at the January&#160;23, 2008
      annual shareholders meeting:</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="top" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(i)</font></div>
            </td>
            <td align="justify" valign="top" width="68%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">The
      election of three directors to the Board of Directors for terms expiring
      in 2011. The results of the voting were as
  follows:</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">DIRECTORS UNTIL
      2011</font></font></font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">FOR</font></font></font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">WITHHELD</font></font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="33%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="22%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="22%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Nina
      Aversano</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21,771,028</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,290,463</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Jane
      M. Kenny</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">22,661,663</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">399,829</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">David
      A. Trice</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">21,674,820</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,386,671</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
addition to the directors elected at the annual meeting, the terms of the
following members of NJR&#8217;s Board of Directors continued after the
meeting:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="justify" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(ii)</font></div>
            </td>
            <td align="justify" valign="top" width="68%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Approval
      of the action of the Audit Committee in retaining Deloitte &amp; Touche
      LLP as NJR&#8217;s independent registered public accounting firm. The results of
      the voting were as follows:</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">FOR</font></font></font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">AGAINST</font></font></font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">ABSTAIN</font></font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="22%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="22%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="22%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">22,770,312</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">223,844</font></div>
            </td>
            <td align="left" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">67,335</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">In
addition to the directors elected at the annual meeting, the terms of the
following members of NJR&#8217;s Board of Directors continued after the
meeting:</font></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Lawrence
      R. Codey</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Laurence
      M. Downes</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">M.
      William Howard</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Alfred
      C. Koeppe</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">J.
      Terry Strange</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">William
      H. Turner</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">George
      R. Zoffinger</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">There
were no broker non-votes in either of the matters voted upon by our
shareholders.</font></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">47</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">New Jersey Resources
Corporation</font></font></div>
          <div style="WIDTH: 100%" align="center"><font style="DISPLAY: inline; FONT-SIZE: 14pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Part
II</font></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="justify" valign="top" width="80%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="exh">ITEM 6</a>.
      EXHIBITS</font></font></div>
              <div>&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">4.9</font></div>
            </td>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$325
      million Revolving Credit Facility Credit Agreement by and among the
      Company, PNC Bank, N.A. as Administrative Agent, the banks party thereto,
      JPMorgan Chase Bank, N.A. and Bank of America, N.A., as Syndication
      Agents, Citibank, N.A. and The Bank of Nova Scotia, as Documentation
      Agents and PNC Capital Markets,&#160;LLC, as Lead Arranger, dated as of
      December&#160;13, 2007.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">31.1</font></div>
            </td>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Certification
      of the Chief Executive Officer pursuant to section 302 of the
      Sarbanes-Oxley Act</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">31.2</font></div>
            </td>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Certification
      of the Chief Financial Officer pursuant to section 302 of the
      Sarbanes-Oxley Act</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">32.1</font></div>
            </td>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Certification
      of the Chief Executive Officer pursuant to section 906 of the
      Sarbanes-Oxley Act*</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">32.2</font></div>
            </td>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Certification
      of the Chief Financial Officer pursuant to section 906 of the
      Sarbanes-Oxley Act*</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div><br></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">*This
certificate accompanies this report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by NJR for purposes of
Section 18 or any other provision of the Securities Exchange Act of 1934, as
amended.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">&#160;</div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt">48</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="1">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><a href="#TOC">Table of Contents</a></font></div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><a name="sig">SIG</a>NATURES</font></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Pursuant
to the requirements of Section&#160;13 or 15(d)&#160;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.</font></div>
    <div><br></div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="39%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">NEW
      JERSEY RESOURCES CORPORATION</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">(Registrant)</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated:</font></div>
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{"company-data": {"conformed-name": "NEW JERSEY RESOURCES CORP", "cik": "0000356309", "assigned-sic": "4924", "irs-number": "222376465", "state-of-incorporation": "NJ", "fiscal-year-end": "1114"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-08359", "film-number": "08582290"}, "business-address": {"street1": "1415 WYCKOFF RD", "street2": "PO BOX 1468", "city": "WALL", "state": "NJ", "zip": "07719", "phone": "9089381494"}, "mail-address": {"street1": "1350 CAMPUS PKWY", "street2": "P O BOX 1468", "city": "WALL", "state": "NJ", "zip": "07719"}}
form10-q.htm
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
FORM 10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 2007
OR
o
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 1-8359
NEW JERSEY RESOURCES
CORPORATION
(Exact
name of registrant as specified in its charter)
New
    Jersey
22-2376465
(State
      or other jurisdiction of
incorporation
      or organization)
(I.R.S.
      Employer
Identification
      Number)
1415 Wyckoff Road, Wall, New
      Jersey 07719
732-938-1480
(Address
      of principal
executive
      offices)
(Registrant's
      telephone number,
including
      area code)
Securities
      registered pursuant to Section 12 (b) of the
  Act:
Common Stock - $2.50 Par
      Value
New York Stock
      Exchange
(Title
      of each class)
(Name
      of each exchange on which
registered)
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:
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer:
x
Accelerated
filer:
o
Non-accelerated
filer:
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
Yes:
o
No:
x
The
number of shares outstanding of $2.50 par value Common Stock as of February 5,
2008
was
27,890,722.
Table of Contents
Part I
New Jersey Resources
Corporation
TAB
LE OF
CONTENTS
Page
Information Concerning Forward-Looking
      Statements
1
PART I
      – FINANCIAL INFORMATION
ITEM
      1.
Financial
      Statements
2
Notes to Condensed Unaudited Consolidated Financial
      Statements
6
Note 1    General
6
Note 2    Regulation
8
Note 3    Derivative
      Instruments
11
Note 4    Investments In Equity
      Investees
12
Note 5    Earnings Per
      Share
13
Note 6    Debt
14
Note 7    Capitalized Financing Costs And
      Deferred Interest
15
Note 8    Stock-Based
      Compensation
16
Note 9    Employee Benefit
      Plans
16
Note 10  Asset Retirement
      Obligations
17
Note 11  Adoption Of Fin 48
17
Note 12  Commitments And Contingent
      Liabilities
18
Note 13  Business Segment Data
20
Note 14  Other
21
ITEM
      2.
Management's Discussion and Analysis of Financial
      Condition and Results of Operations for the Three Months Ended
      December 31, 2007
21
ITEM
      3.
Quantitative and Qualitative Disclosures About Market
      Risk
41
ITEM
      4.
Controls and
      Procedures
44
PART II –
      OTHER INFORMATION
ITEM
      1.
Legal
      Proceedings
46
ITEM
      1A.
Risk
      Factors
46
ITEM
      2.
Unregistered Sale of Equity Securities and Use of
      Proceeds
46
ITEM
      4.
Submission of Matters to a Vote of Security
      Holders
47
ITEM
      6.
Exhibits
48
Signatures
49
Table of Contents
New Jersey Resources
Corporation
INFO
RMATION
      CONCERNING FORWARD-LOOKING STATEMENTS
Certain
statements contained in this report, including, without limitation, statements
as to management expectations and beliefs presented in Part I, Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Part I, Item 3. "Quantitative and Qualitative Disclosures about
Market Risk," Part II, Item I. "Legal Proceedings" and in the notes to the
financial statements are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements can
also be identified by the use of forward-looking terminology such as "may,"
"intend," "expect," "believe" or "continue" or comparable terminology and are
made based upon management's expectations and beliefs concerning future
developments and their potential effect upon New Jersey Resources Corporation
(NJR or the Company). There can be no assurance that future developments will be
in accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by
management.
The Company cautions readers that the
assumptions that form the basis for forward-looking statements regarding
customer growth, customer usage, financial condition, results of operations,
cash flows, capital requirements, market risk and other matters for fiscal 2008
and thereafter include many factors that are beyond the Company's ability to
control or estimate precisely, such as estimates of future market conditions,
the behavior of other market participants and changes in the debt and equity
capital markets. The factors that could cause actual results to differ
materially from NJR's expectations include, but are not limited to, those
discussed in Risk Factors in Item 1A, as well as the following:
Ÿ
weather
      and economic conditions;
Ÿ
demographic
      changes in the New Jersey Natural Gas (NJNG) service
      territory;
Ÿ
the
      rate of NJNG customer growth;
Ÿ
volatility
      of natural gas commodity prices and its impact on customer usage, NJR
      Energy Services' (NJRES) operations and on the Company's risk management
      efforts;
Ÿ
changes
      in rating agency requirements and/or credit ratings and their effect on
      availability and cost of capital to the Company;
Ÿ
commercial
      and wholesale credit risks, including creditworthiness of customers and
      counterparties;
Ÿ
the
      ability to obtain governmental approvals and/or financing for the
      construction, development and operation of certain non-regulated energy
      investments;
Ÿ
risks
      associated with the management of the Company's joint ventures and
      partnerships;
Ÿ
the
      impact of governmental regulation (including the regulation of
      rates);
Ÿ
fluctuations
      in energy-related commodity prices;
Ÿ
conversion
      activity and other marketing efforts;
Ÿ
actual
      energy usage of NJNG's customers;
Ÿ
the
      pace of deregulation of retail gas markets;
Ÿ
access
      to adequate supplies of natural gas;
Ÿ
the
      regulatory and pricing policies of federal and state regulatory
      agencies;
Ÿ
the
      ultimate outcome of pending regulatory proceedings, in particular, the
      base rate case filing;
Ÿ
changes
      due to legislation at the federal and state level;
Ÿ
the
      availability of an adequate number of appropriate counterparties in the
      wholesale energy trading market;
Ÿ
sufficient
      liquidity in the wholesale energy trading market and continued access to
      the capital markets;
Ÿ
the
      disallowance of recovery of environmental-related expenditures and other
      regulatory changes;
Ÿ
environmental-related
      and other litigation and other uncertainties;
Ÿ
the
      effects and impacts of inflation on NJR and its subsidiaries
      operations;
Ÿ
change
      in accounting pronouncements issued by the appropriate standard setting
      bodies; and
Ÿ
terrorist
      attacks or threatened attacks on energy facilities or unrelated energy
      companies.
While
the Company periodically reassesses material trends and uncertainties affecting
the Company's results of operations and financial condition in connection with
its preparation of management's discussion and analysis of results of operations
and financial condition contained in its Quarterly and Annual Reports, the
Company does not, by including this statement, assume any obligation to review
or revise any particular forward-looking statement referenced herein in light of
future events.
1
Table of Contents
New Jersey Resources
Corporation
Part
I
ITEM 1
.
      FINANCIAL STATEMENTS
CO
NDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months
      Ended
December 31,
(Thousands, except per share data)
2007
2006
As Restated
(See Note
    1)
OPERATING
      REVENUES
$811,138
$  737,401
OPERATING
      EXPENSES
Gas
      purchases
684,694
621,935
Operation
      and maintenance
32,179
28,316
Regulatory
      rider expenses
12,165
9,466
Depreciation
      and amortization
9,403
8,902
Energy
      and other taxes
18,160
13,952
Total
      operating expenses
756,601
682,571
OPERATING
      INCOME
54,537
54,830
Other
      income
1,528
1,296
Interest
      charges, net
7,810
7,875
INCOME BEFORE INCOME TAXES AND
      EQUITY IN EARNINGS OF AFFILIATES
48,255
48,251
Income
      tax provision
18,494
19,234
Equity
      in earnings of affiliates, net of tax
424
417
NET
    INCOME
$ 30,185
$29,434
EARNINGS PER COMMON
      SHARE
BASIC
$1.09
$1.06
DILUTED
$1.08
$1.05
DIVIDENDS PER COMMON
      SHARE
$0.40
$0.38
WEIGHTED AVERAGE SHARES
      OUTSTANDING
BASIC
27,785
27,713
DILUTED
27,952
27,904
PRO-FORMA EARNINGS PER COMMON
      SHARE (See Note 5)
BASIC
$0.72
$0.71
DILUTED
$0.72
$0.70
See
Notes to Condensed Unaudited Consolidated Financial Statements
2
Table of Contents
New Jersey Resources
Corporation
Part
I
ITEM 1. FINANCIAL STATEMENTS
      (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Three Months
      Ended
December 31,
(Thousands)
2007
2006
As Restated
(See Note 1)
CASH FLOWS FROM OPERATING
      ACTIVITIES
Net
      income
$
30,185
$
29,434
Adjustments to reconcile net
      income to cash flows from operating activities:
Unrealized
      loss (gain) on derivative instruments, net of tax
3,080
(2,069
)
Depreciation
      and amortization
9,478
8,977
Allowance
      for funds used during construction
(373
)
—
Deferred
      income taxes
8,549
2,842
Manufactured
      gas plant remediation costs
(4,041
)
(4,235
)
Equity
      in earnings from investments, net of distributions
1,512
(417
)
Cost
      of removal – asset retirement obligations
(177
)
(257
)
Contributions
      to employee benefit plans
(150
)
(150
)
Changes
      in:
Components
      of working capital
(57,844
)
(14,579
)
Other
      noncurrent assets
2,423
1,635
Other
      noncurrent liabilities
833
(8,824
)
Cash
      flows (used in) from operating activities
$
(6,525
)
$
12,357
CASH FLOWS FROM FINANCING
      ACTIVITIES
Proceeds
      from issuance of common stock
4,192
4,976
Tax
      benefit from stock options exercised
547
769
Proceeds
      from sale-leaseback transaction
7,485
5,482
Payments
      of long-term debt
(937
)
(775
)
Purchases
      of treasury stock
(10,071
)
—
Payments
      of common stock dividends
(10,633
)
(10,056
)
Net
      proceeds from short-term debt
32,547
4,900
Cash
      flows from financing activities
$
23,130
$
5,296
CASH FLOWS FROM INVESTING
      ACTIVITIES
Expenditures
      for
Utility
      plant
(13,526
)
(12,463
)
Real
      estate properties and other
(168
)
(569
)
Cost
      of removal
(1,208
)
(1,283
)
Investments
      in equity investees
(2,998
)
—
Proceeds
      from asset sales
—
1,792
Cash
      flows used in investing activities
(17,900
)
(12,523
)
Change
      in cash and temporary investments
(1,295
)
5,130
Cash
      and temporary investments at beginning of period
5,140
4,991
Cash
      and temporary investments at end of period
$
3,845
$
10,121
CHANGES IN COMPONENTS OF
      WORKING CAPITAL
Receivables
$
(194,958
)
$
(146,039
)
Inventories
33,940
23,569
Underrecovered
      gas costs
(18,883
)
(28,758
)
Gas
      purchases payable
96,217
124,439
Prepaid
      and accrued taxes, net
31,043
19,154
Accounts
      payable and other
(1,017
)
(3,654
)
Restricted
      broker margin accounts
(881
)
5,875
Customers'
      credit balances and deposits
7,299
(10,029
)
Other
      current assets
(10,604
)
864
Total
$
(57,844
)
$
(14,579
)
SUPPLEMENTAL DISCLOSURES OF
      CASH FLOWS INFORMATION
Cash
      paid for
Interest
      (net of amounts capitalized)
$
6,434
$
7,599
Income
      taxes
$
2,661
$
8,000
See
Notes to Condensed Unaudited Consolidated Financial Statements
3
Table of Contents
New Jersey Resources
Corporation
Part
I
ITEM 1. FINANCIAL STATEMENTS
      (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
December 31,
September
      30,
(Thousands)
2007
2007
PROPERTY, PLANT AND
      EQUIPMENT
Utility
      plant, at cost
$
1,313,739
$
1,299,445
Real
      estate properties and other, at cost
28,859
28,793
1,342,598
1,328,238
Accumulated
      depreciation and amortization
(363,891
)
(357,367
)
Property,
      plant and equipment, net
978,707
970,871
CURRENT
      ASSETS
Cash
      and temporary investments
3,845
5,140
Customer
      accounts receivable
Billed
270,323
132,444
Unbilled
66,177
8,895
Allowance
      for doubtful accounts
(3,369
)
(3,166
)
Regulatory
      assets
29,245
24,634
Gas
      in storage, at average cost
404,825
439,168
Materials
      and supplies, at average cost
5,436
5,033
Prepaid
      state taxes
9,229
28,034
Derivatives,
      at fair value
127,699
138,986
Broker
      margin account
8,590
12,345
Other
15,122
8,353
Total
      current assets
937,122
799,866
NONCURRENT
      ASSETS
Investments
      in equity investees
89,902
86,743
Regulatory
      assets
305,832
312,369
Derivatives,
      at fair value
39,213
44,306
Restricted
      cash
4,200
4,200
Other
12,779
12,390
Total
      noncurrent assets
451,926
460,008
Total
      assets
$
2,367,755
$
2,230,745
See
Notes to Condensed Unaudited Consolidated Financial Statements
4
Table of Contents
New Jersey Resources
Corporation
Part
I
ITEM 1. FINANCIAL STATEMENTS
      (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
CAPITALIZATION AND
LIABILITIES
December 31,
September
      30,
(Thousands)
2007
2007
CAPITALIZATION
Common
      stock equity
$
668,969
$
644,797
Long-term
      debt
359,165
383,184
Total
      capitalization
1,028,134
1,027,981
CURRENT
      LIABILITIES
Current
      maturities of long-term debt
34,905
4,338
Short-term
      debt
289,026
256,479
Gas
      purchases payable
314,553
218,336
Accounts
      payable and other
55,341
64,386
Dividends
      payable
11,101
10,633
Deferred
      and accrued taxes
24,064
9,031
Regulatory
      liabilities
—
9,583
New
      Jersey clean energy program
10,945
8,832
Derivatives,
      at fair value
62,120
79,243
Broker
      margin account
1,917
15,143
Customers'
      credit balances and deposits
34,561
27,262
Total
      current liabilities
838,533
703,266
NONCURRENT
      LIABILITIES
Deferred
      income taxes
216,553
216,258
Deferred
      investment tax credits
7,434
7,513
Deferred
      revenue
9,631
9,806
Derivatives,
      at fair value
40,474
38,085
Manufactured
      gas plant remediation
105,340
105,340
Postemployment
      benefit liability
27,170
25,743
Regulatory
      liabilities
61,012
61,270
New
      Jersey clean energy and conservation incentive programs
1,227
3,992
Asset
      retirement obligation
24,068
23,895
Other
8,179
7,596
Total
      noncurrent liabilities
501,088
499,498
Total
      capitalization and liabilities
$
2,367,755
$
2,230,745
See
Notes to Condensed Unaudited Consolidated Financial Statements
5
Table of Contents
New Jersey Resources
Corporation
Part
I
NOT
ES TO
      CONDENSED UNAUDITED CONSOLIDATED FINANCIAL
    STATEMENTS
1.
GE
NERAL
The
condensed consolidated financial statements have been prepared without audit, as
of December 31, 2007 and for three months ended December 31, 2007 and 2006,
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). The September 30, 2007 balance sheet data is derived from the audited
financial statements of New Jersey Resources Corporation (NJR or the Company).
These condensed consolidated financial statements should be read in conjunction
with the financial statements and the notes thereto included in NJR's 2007
Annual Report on Form 10-K.
The
condensed consolidated financial statements include the accounts of NJR and its
subsidiaries, New Jersey Natural Gas (NJNG), NJR Energy Services (NJRES), NJR
Retail Holdings (Retail Holdings), NJR Energy Investment (NJREI) and NJR Service
Company (NJR Service). Intercompany transactions and accounts have been
eliminated. Retail Holdings' two principal subsidiaries are NJR Home Services
(NJRHS) and Commercial Realty & Resources (CR&R). NJREI's primary
subsidiaries are NJR Energy and NJR Steckman Ridge Storage Company. NJR Energy
invests primarily in energy-related ventures through its subsidiary, NJNR
Pipeline (Pipeline), which holds the Company's 5.53 percent ownership interest
in Iroquois Gas and Transmission System, L.P. (Iroquois). NJR Steckman Ridge
Storage Company holds the Company's 50 percent combined interest in Steckman
Ridge GP, LLC and Steckman Ridge, LP (collectively, Steckman Ridge), a natural
gas storage facility that was acquired and is being developed with a partner in
western Pennsylvania.
In
the opinion of management, the information furnished reflects all adjustments
necessary for a fair presentation of the results of the interim periods. Because
of the seasonal nature of NJR's utility and wholesale energy services
operations, in addition to other factors, the financial results for the interim
periods presented are not indicative of the results that are to be expected for
the fiscal year ending September 30, 2008.
Current
Assets
Included
in Other current assets is $2.6 million of restricted cash related to NJNG
natural gas purchases.
New Accounting
Standards
Recently Adopted
In
July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation
No. 48,
Accounting for
Uncertainty in Income Taxes
(FIN 48), which alters the framework for
recognizing income tax contingencies. Previously, under Statement of Financial
Accounting Standards (SFAS) No. 5,
Accounting for Contingencies
,
the focus was on the subsequent liability recognition for estimated losses from
tax contingencies where such losses were probable and the related amounts could
be reasonably estimated. Under this new interpretation, a contingent tax asset
(i.e., an uncertain tax position) may only be recognized if it is more likely
than not that it will ultimately be sustained upon audit. The Company adopted
FIN 48 on October 1, 2007. The Company has evaluated its tax positions for all
jurisdictions and all years for which the statute of limitations remains open
and in accordance with the provisions of FIN 48, recorded an additional
liability for unrecognized tax benefits and interest of approximately $4.3
million and an increase in retained earnings as of October 1, 2007 of
approximately $1.2 million.. For additional information on the effect of
adoption, see
Note 11.
Adoption
of FIN
48
.
Not Yet Adopted
In
September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS
157). SFAS 157 defines fair value as the amount that would be exchanged to sell
an asset or transfer a liability, in an orderly transaction between market
participants, and establishes a fair value hierarchy of quotes and unobservable
data that should be used to develop pricing assumptions. In addition, for assets
and liabilities that are not actively traded, for example, certain kinds of
derivatives, SFAS 157 requires that a fair value measurement include an
adjustment for risks
6
Table of Contents
New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
inherent
in a valuation technique and/or inputs, such as those used in pricing models.
SFAS 157 is effective for fiscal years beginning after November 15, 2007.
The Company will adopt the provisions of the statement prospectively and is
evaluating the effect on its financial position and results of
operations.
In
February 2007, the FASB issued SFAS No. 159,
The
Fair Value Option for Financial
Assets and Financial Liabilities
(SFAS 159). SFAS 159 permits entities to
elect to measure eligible items at fair value as an alternative to hedge
accounting and to mitigate volatility in earnings. A company can either elect
the fair value option according to a pre-existing policy, when the asset or
liability is first recognized or when it enters into an eligible firm
commitment. Changes in the fair value of assets and liabilities that the Company
chooses to apply the fair value option to, are reported in earnings at each
reporting date. SFAS 159 also provides guidance on disclosures that are intended
to provide comparability to other companies' assets and liabilities that have
different measurement attributes and to other companies with similar financial
assets and liabilities. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the potential impact on
its statement of financial position and results of operations.
In
June 2007, the FASB Emerging Issues Task Force (EITF) reached consensus on EITF
Issue No. 06-11,
Accounting
for Income Tax Benefits of Dividends on Share-Based Payment Awards
(EITF
06-11). EITF 06-11 applies to share-based payment arrangements that entitle
employees to receive dividends or dividend equivalents and provides that the tax
benefit related to dividends on certain share-based awards be recognized as an
increase to additional paid-in capital and should be included in the pool of
excess tax benefits available to absorb future tax deficiencies on share-based
payment awards. EITF 06-11 will be applied prospectively to the income tax
benefits of applicable dividends declared by the Company for fiscal years
beginning after December 15, 2007. The Company is currently evaluating the
effect of adoption on its statement of financial position and results of
operations.
On
December 4, 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in
Consolidated Financial Statements
(SFAS 160). SFAS 160 is an amendment of
Accounting Research Bulletin (ARB) No. 51 and was issued to improve the
relevance, comparability, and transparency of the financial information that a
reporting entity provides in its consolidated financial statements. This
Statement applies to all entities that prepare consolidated financial
statements, except not-for-profit organizations, but will affect only those
entities that have an outstanding noncontrolling interest in one or more
subsidiaries. SFAS 160 clarifies that a noncontrolling interest in a subsidiary
is an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements and that a parent company must
recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS
160 is effective for fiscal years beginning after December 15, 2008 and early
adoption is prohibited. The Company is currently evaluating the potential impact
on its statement of financial position and results of operations.
On
April 10, 2007, the FASB issued FASB Staff Position No. FIN 39-1 (FSP FIN 39-1),
Amendment of FASB
Interpretation No. 3
9
.
FSP FIN 39-1 provides
additional guidance for parties that are subject to master netting
arrangements. Specifically, for transactions that are executed with the
same counterparty, it permits companies to offset the fair value amounts
recognized for derivatives as well as the related fair value amounts of cash
collateral receivables or payables, when certain conditions apply. FSP FIN
39-1 is effective for fiscal years beginning after November 15, 2007, with early
application permitted. The Company's policy is to present its derivative
positions and any receivables or payables with the same counterparty on a gross
basis, therefore, NJR does not anticipate that FSP FIN 39-1 will have an impact
on its statement of financial position and results of operations.
Restatement
Subsequent
to the issuance of December 31, 2006 interim financial statements, the Company
determined that certain derivative financial instruments at NJRES and NJR Energy
were incorrectly accounted for as cash flow hedges. As a result, NJR concluded
that the change in fair value of these derivative instruments should be recorded
as a component of Gas purchases, or Operating revenues, as appropriate, in the
Condensed Consolidated Statements of Income and not in Other comprehensive
income, which is a component of Common Stock Equity, where they had been
previously reported in the Company's Quarterly Report on Form 10-Q as of and for
the three-month period ended December 31, 2006.
7
Table of Contents
New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accordingly,
the following table sets forth the effects of the restatement on affected line
items in the Condensed Consolidated Statements of Income and Condensed
Consolidated Statements of Cash Flows for the three-month period ended December
31, 2006. Also included in the adjustment column, and as separate line items in
the tables below, are certain immaterial corrections that the Company made to
Other income and Equity in earnings of equity investees, net of tax for first
quarter of fiscal 2007.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Thousands)
As
Previously
Reported
Adjustment
As
Restated
Operating
      revenue
$
741,465
$
(4,064
)
$
737,401
Gas
      purchases
$
628,685
$
(6,750
)
$
621,935
Total
      operating expenses
$
689,321
$
(6,750
)
$
682,571
Operating
      Income
$
52,144
$
2,686
$
54,830
Other
      income
$
1,989
$
(693
)
$
1,296
Income
      before income taxes and equity in earnings of affiliates
$
46,258
$
1,993
$
48,251
Income
      tax provision
$
18,134
$
1,100
$
19,234
Equity
      in earnings, net of tax
$
—
$
417
$
417
Net
      Income
$
28,124
$
1,310
$
29,434
Basic
      earnings per share
$
1.01
$
0.05
$
1.06
Diluted
      earnings per share
$
1.01
$
0.04
$
1.05
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Thousands)
As Previously
Reported
Adjustment
As
Restated
Net
      Income
$
28,124
$
1,310
$
29,434
Unrealized
      loss (gain) on derivative instruments, net of tax
$
120
$
(2,189
)
$
(2,069
)
Equity
      in earnings from investments, net of distributions
$
—
$
(417
)
$
(417
)
Other
      noncurrent assets
$
1,218
$
417
$
1,635
Other
      noncurrent liabilities
$
(9,703
)
$
879
$
(8,824
)
2.
RE
GULATION
Filed Base Rate
Case
As
a result of increases in NJNG's operating, maintenance and capital costs, NJNG
petitioned the New Jersey Board of Public Utilities (BPU), on November 20, 2007,
to increase base rates for delivery service by approximately $58.4 million,
which includes a return on NJNG's equity component of 11.375 percent. This
petition is consistent with NJNG's objectives of providing safe and reliable
service to its customers and earning a market-based return on its regulated
investments. Preliminary matters and timelines are being established among NJNG,
the BPU and Division of Rate Counsel (Rate Counsel) before the Office of the
Administrative Law Judge. Based upon statutory time frames and potential
regulatory lag, it is unlikely that any modification to NJNG's delivery rates
would become effective during fiscal 2008.
Conservation Incentive Program
(CIP)
The
CIP allows NJNG to recover utility gross margin variations related to both
weather and customer usage. Recovery of such utility gross margin variations
(filed for annually and recovered one year following the end of the CIP usage
year) is subject to additional conditions, including an earnings test and an
evaluation of Basic Gas Supply Service (BGSS) related savings.
8
Table of Contents
New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In
October 2007, the BPU provisionally approved the implementation of NJNG's
initial CIP recovery rates, based upon program information NJNG included in an
Amendment to its Petition for Annual Review, which was filed with the BPU in
August 2007. The approved rates add 1.7 percent to the average residential
heating customer's bill and are designed to recover approximately $15.6 million
of previously accrued amounts.
In
conjunction with the CIP, NJNG incurs costs related to its obligation to fund
programs that promote customer conservation efforts during the pilot program. As
of December 31, 2007, NJNG had a remaining liability of $1.2 million related to
these programs.
Basic Gas Supply
Service
BGSS
is a BPU approved rate mechanism designed to allow for the recovery of natural
gas commodity costs. NJNG periodically adjusts its rates to its residential and
small commercial customers to reflect increases or decreases in the cost of
natural gas sold to customers. The following are NJNG's BGSS filings and related
rate adjustments or refunds during the first quarter of fiscal
2008:
Ÿ
On
      October 3, 2007, the BPU provisionally approved a decrease to NJNG's BGSS
      rate effective October 4, 2007, which results in a 3.6 percent decrease to
      the average residential customer bill.
Ÿ
On
      November 26, 2007, NJNG notified the BPU that it would provide refunds and
      subsequently issued a credit to customers of $32 million in December 2007,
      as a result of the decrease in the anticipated costs of wholesale natural
      gas prices.
Other Incentive
Programs
NJNG
is eligible to receive financial incentives for reducing BGSS costs through a
series of utility gross margin-sharing programs that include off-system sales,
capacity release, storage incentive and financial risk management (FRM)
programs. In October 2007, the BPU approved an extension of the utility gross
margin-sharing programs mentioned above through October 31, 2008. Concurrently,
the BPU reduced the sharing percentage of the margin generated by the FRM
program that will be retained by NJNG from 20 percent to 15 percent effective
November 1, 2007. The incentive programs are subject to revisions in NJNG's base
rate case and remain in effect as currently established until it is
resolved.
Societal Benefits Clause (SBC) and
Weather Normalization Clause (WNC)
The
SBC is comprised of three primary components: a Universal Service Fund rider
(USF), a Manufactured Gas Plant Remediation Adjustment Clause (RAC), and the New
Jersey Clean Energy Program (NJCEP).
In
October 2007, the BPU approved the following adjustments to recovery rates
associated with the SBC programs:
SBC
Ÿ
$14.7
      million in eligible costs to be recovered annually for MGP remediation
      expenditures incurred through June 30, 2006;
Ÿ
an
      increase in the recovery of NJCEP funding requirements from $6.3 million
      to $13.0 million for fiscal year 2008 due to the gradual increase in
      NJNG's obligation to the State of New Jersey and a prior underrecovery,
      (NJNG's liability as of December 31, 2007 was $11 million);
      and,
Ÿ
a
      decrease to the statewide USF recovery rate, which will have a negligible
      impact on customer rates.
9
Table of Contents
New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In
addition, the BPU approved an increase of $8.1 million, or 0.9 percent to the
WNC rate, to recover the net amounts deferred relating to weather related margin
variations during the 2004-2005 and 2005-2006 winter periods.
Regulatory Assets &
Liabilities
The
Company had the following regulatory assets, all related to NJNG, on the
Condensed Consolidated Balance Sheets:
(Thousands)
December
31,
2007
September
      30,
2007
Recovery
      Period
Regulatory
      assets–current
Underrecovered
      gas costs
$    9,300
—
Less
      than one year
(1)
WNC
5,860
8,105
Less
      than one year
(2)
CIP
14,085
16,529
Less
      than one year
(3)
Total
      current
$  29,245
$  24,634
Regulatory
      assets–noncurrent
Remediation
      costs (Note 12)
Expended,
      net
$  85,533
$  85,071
(4)
Liability
      for future expenditures
105,340
105,340
(5)
CIP
4,191
—
(6)
Deferred
      income and other taxes
13,815
13,979
Various
(7)
Derivatives
      (Note 3)
45,354
51,861
(8)
Postemployment
      benefit costs (Note 9)
33,614
33,988
(9)
SBC
17,985
22,130
Various
(10)
Total
      noncurrent
$305,832
$312,369
(1)
Recoverable,
      subject to BPU approval, through BGSS, without
interest.
(2)
Recoverable
      as a result of BPU approval in October 2007, without interest. This
      balance reflects the net results for the winter periods of 2004-2005 and
      2005-2006. No new WNC activity is being recorded due to the existence of
      the CIP. All previously deferred amounts related to the WNC have been
      approved for recovery.
(3)
Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $7.0 million relating to the weather component of
      the calculation and approximately $7.1 million relating to the customer
      usage component of the calculation. Recovery from customers is designed to
      be one year from date of rate approval by the BPU.
(4)
Recoverable,
      subject to BPU approval, with interest over rolling 7-year
      periods.
(5)
Estimated
      future expenditures. Recovery will be requested when actual expenditures
      are incurred.
(6)
Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $1.8 million relating to the weather component of
      the calculation and approximately $2.4 million relating to the customer
      usage component of the calculation.
(7)
Recoverable
      without interest, subject to BPU approval.
(8)
Recoverable,
      subject to BPU approval, through BGSS, without
interest.
(9)
Recoverable
      or refundable, subject to BPU approval, without interest. Includes
      unrecognized service costs recorded in accordance with SFAS No. 158,
Employers' Accounting for
      Defined Benefit Pension and Other Postemployment Plans
that NJNG
      has determined are recoverable in rates charged to customers (see
Note 9. Employee Benefit
      Plans).
(10)
Recoverable
      with interest, subject to BPU
approval.
If
there are any changes in regulatory positions that indicate the recovery of
regulatory assets is not probable, the related cost would be charged to income
in the period of such determination.
10
Table of Contents
New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
Company had the following regulatory liabilities, all related to NJNG, on the
Condensed Consolidated Balance Sheets:
(Thousands)
December
31,
2007
September
      30,
2007
Regulatory
      liability–current
Overrecovered
      gas costs
—
$  9,583
Total
      current
—
$  9,583
Regulatory
      liabilities–noncurrent
Cost
      of removal obligation
(1)
$61,012
$60,094
Market
      development fund (MDF)
(2)
—
1,176
Total-noncurrent
$61,012
$61,270
(1)
NJNG
      accrues and collects for cost of removal in rates. This liability
      represents collections in excess of actual expenditures. Approximately
      $19.9 million, including accretion of $350,000 for the three-month period
      ended December 31, 2007, of regulatory assets relating to asset retirement
      obligations have been netted against the cost of removal obligation as of
      December 31, 2007 (see
Note 10. Asset Retirement
      Obligations).
(2)
The
      MDF provided financial incentives to encourage customers to switch to
      third party suppliers and has supported other unbundling related
      initiatives. The MDF funding obligations terminated as of October 31,
      2006 and the remaining balance was credited back to customers through the
      BGSS in October 2007.
3.
DERI
VATIVE
      INSTRUMENTS
The
Company and its subsidiaries are subject to market risk due to fluctuations in
the price of natural gas. To manage the risk of such fluctuations, the Company
and its subsidiaries enter into futures contracts, option agreements and swap
agreements to economically hedge future purchases and sales of natural
gas.
On
October 1, 2007, the Company changed the treatment of its physical commodity
contracts at NJRES, such that all contracts entered into after September 30,
2007 are now recognized as derivative instruments, and are not accounted for
using the "normal purchase normal sales" scope exception of Statement of
Financial Accounting Standards No. 133,
Accounting for Derivative
Instruments and Hedging Activities
(as amended and interpreted, SFAS
133). All NJRES physical commodity contracts entered into after September 30,
2007, are accounted for at fair value on the Condensed Consolidated Balance
Sheets, with changes in fair value being reflected as a component of Operating
revenues on the Condensed Consolidated Statements of Income. All physical
commodity contracts at NJRES that were in existence prior to October 1, 2007,
which were previously designated as meeting the normal purchase normal sales
scope exception of SFAS 133, as well as physical commodity contracts at NJNG and
NJR Energy, which also meet the normal purchase normal sale scope exception,
continue to be accounted for under accrual accounting.
All
of the Company's financial instruments (financial futures, options or swaps),
are accounted for as derivatives in accordance with SFAS 133 and recorded
at fair value in the Condensed Consolidated Balance Sheets. Changes in fair
value are recorded as a component of Gas purchases or Operating revenues, for
NJRES and NJR Energy, respectively, in the Condensed Consolidated Statements of
Income as unrealized gains or losses. Changes in fair value of NJNG's financial
derivative instruments are recorded as a component of Regulatory assets or
liabilities in the Condensed Consolidated Balance Sheets, as these amounts will
be recovered through future BGSS amounts as an increase or reduction to the cost
of natural gas in NJNG's tariff.
When
certain financial derivative instruments at NJRES settle prior to the actual
sale of the natural gas inventory purchases that they were designed to
economically hedge, NJRES records realized gains or losses as a component of Gas
purchases in the Condensed Consolidated Statements of Income.
11
Table of Contents
New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unrealized
gains (losses) and realized gains (losses) at NJRES related to financial
derivative instruments that are included as a component of Gas purchases, and
unrealized gains (losses) at NJR Energy related to financial derivative
instruments and unrealized gains (losses) at NJRES related to physical commodity
contracts that are included as a component of Operating revenues, for the three
months ended December 31, 2007 and 2006 are as follows:
December
    31,
(Thousands)
2007
2006
NJRES:
Unrealized
      gains – Physical Commodity Contracts
$   2,044
—
Unrealized
      (losses) gains – Financial Instruments
(6,966
)
8,039
Realized
      (losses) – Financial Instruments
(5,163
)
(1,289
)
Subtotal
      NJRES
$(10,085
)
$
      6,750
NJR
      Energy
Unrealized
      gains (losses) – Financial Instruments
(305
)
(4,064
)
Total
      NJRES and NJR Energy unrealized and realized (losses)
gains
$(10,390
)
$
      2,686
Generally,
exchange-traded futures contracts require a deposit of margin cash, the amount
of which is subject to change based on market price movements and in accordance
with exchange rules. The Company maintains broker margin accounts for NJNG and
NJRES. The balances are as follows:
(Thousands)
December
31,
2007
September 30,
2007
NJNG
      broker margin deposit
$       39
$
      12,345
NJNG
      broker margin (liability)
$(1,917
)
—
NJRES
      broker margin deposit (liability)
$ 8,551
$(15,143
)
4.
INV
ESTMENTS
      IN EQUITY INVESTEES
NJR's
Investments in equity investees include the following investments:
(Thousands)
December
31,
2007
September 30,
2007
Steckman
      Ridge
$60,881
$56,726
Iroquois
20,844
22,073
Other
8,177
7,944
Total
$89,902
$86,743
NJR
uses the equity method of accounting for its investments in Steckman Ridge and
Iroquois.
Other
investments represent investments in equity securities of publicly traded energy
companies, all of which are immaterial on an individual basis, and are accounted
for as available for sale securities, with any change in the value of such
investments recorded as Accumulated other comprehensive income, a component of
Common stock equity.
12
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New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following is summarized financial information for Iroquois, as of and for the
three-month periods as indicated below:
December
    31,
(Thousands)
2007
2006
Operating
      revenues
$
38,754
$
39,519
Operating
      income
$
19,298
$
20,021
Net
      income
$
7,582
$
7,473
(Millions)
December
31,
2007
September 30,
2007
Total
      assets
$
791.0
$
814.3
5.
EAR
NINGS PER
      SHARE
The
following table presents the calculation of the Company's basic and diluted
earnings per share:
Three Months
      Ended
December
    31,
(Thousands, except per share
      amounts)
2007
2006
Net
      Income, as reported
$30,185
$29,434
Basic
      earnings per share
Weighted
      average shares of common stock outstanding–basic
27,785
27,713
Basic
      earnings per common share
$1.09
$1.06
Diluted
      earnings per share
Weighted
      average shares of common stock outstanding–basic
27,785
27,713
Incremental
      shares
(1)
167
191
Weighted
      average shares of common stock outstanding–diluted
27,952
27,904
Diluted
      earnings per common share
$1.08
$1.05
(1)
Incremental shares consist of
      stock options, stock awards and performance
  units.
On
January 23, 2008 the Company announced a three for two stock split payable on
March 3, 2008 with fractional shares paid in cash. The amounts above do not
include the effect of this proposed stock split. The following table shows the
impact of the planned stock split on the number of shares outstanding and
calculated basic and diluted earnings per share as if it occurred at the
beginning of the earliest period presented:
Pro- Forma
Three Months
      Ended
December
    31,
(Thousands, except per share
      amounts)
2007
2006
Net
      Income
$30,185
$29,434
Basic
      earnings per share
Weighted
      average shares of common stock outstanding–basic
41,678
41,570
Basic
      earnings per common share
$0.72
$0.71
Diluted
      earnings per share
Weighted
      average shares of common stock outstanding–basic
41,678
41,570
Incremental
      shares
250
287
Weighted
      average shares of common stock outstanding–diluted
41,928
41,857
Diluted
      earnings per common share
$0.72
$0.70
13
Table of Contents
New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6.
DE
BT
NJR
On
December 13, 2007, NJR refinanced its prior senior credit facility for a new
$325 million, five-year, revolving, unsecured credit facility. The new credit
facility permits the borrowing of amounts under a revolving basis, as well as
the issuance of letters of credit. It also permits an increase to the facility,
from time to time, with the existing or new lenders, in a minimum of $5 million
increments up to a maximum $100 million. The new credit facility refinances an
earlier credit facility that provided for $325 million in revolving credit that
was scheduled to expire on December 16, 2007. The Company used the initial
borrowings under the new credit facility to refinance its prior credit facility
and pay all related fees and expenses. Depending on borrowing levels and credit
ratings, NJR's interest rate can either be, at its discretion, the London
inter-bank offered rate ("LIBOR") or the Federal Funds Open Rate plus an
applicable spread and facility fee. As of December 31, 2007, NJR's effective
rate was 5.18% on outstanding borrowings of $92.6 million under this credit
facility.
As
of December 31, 2007, NJR had four letters of credit outstanding, totaling $17.5
million, on behalf of NJRES. Two letters of credit, totaling $4.5 million, are
used in conjunction with a long-term natural gas storage agreement and expire on
December 31, 2008. The other two letters of credit, totaling $13 million, are
used for margin and collateral requirements for natural gas transactions and
expire on March 31, 2008.
NJR
also has a $675,000 letter of credit outstanding on behalf of CR&R, which
will expire on December 31, 2008. The letter of credit is in place to support
development activities.
These
letters of credit reduce the amount available under NJR's committed credit
facility by the same amount. NJR does not anticipate that these letters of
credit will be drawn upon by the counterparties and they will be renewed as
necessary.
NJNG
In
August 2007, the BPU approved NJNG's petition requesting authorization to issue
and sell, in one or more series, an aggregate of $125 million in medium-term
notes through July 31, 2010. The notes may be issued on a secured or unsecured
basis and maturities can range from one to forty years. The proceeds from the
issuance of the notes will be used to refinance short-term debt, which has been
incurred to fund capital expenditure requirements and pension and other
post-employment benefit programs. NJNG is currently seeking approval to revise
the market yield spread conditions of the BPU's prior approval to reflect
current credit market conditions. Provided that such approval is granted by the
BPU, the notes are anticipated to be issued during the second quarter of fiscal
2008.
NJNG
received $7.5 million and $5.5 million in December 2007 and 2006, respectively,
in connection with the sale-leaseback of its natural gas meters. This
sale-leaseback program is expected to be continued on an annual
basis.
At
December 31, 2007, NJNG had a stand alone letter of credit in the amount of $3
million, which will expire on December 31, 2008. This letter of credit does not
reduce the amount available to be borrowed under NJNG's credit facility. NJNG
does not anticipate that this letter of credit will be drawn upon by the
counterparty, and it will be renewed as necessary, upon its
expiration.
Neither
NJNG nor the results of its operations are obligated or pledged to support the
NJR or NJRES credit facilities.
NJRES
As
of December 31, 2007 NJRES had a 3-year $30 million committed credit facility
that expires in October 2009 with a multinational financial institution. There
were no borrowings under this facility as of December 31, 2007.
14
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New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Consolidated
There
were no issuances or redemptions of long-term debt securities for NJR, NJNG or
NJRES during the three months ended December 31, 2007
A
summary of NJR's and NJNG's long-term debt, committed credit facilities which
require commitment fees on the unused amounts, and NJRES' committed facility
that does not require a fee, are as follows:
December
    31,
September
      30,
(Thousands)
2007
2007
NJR
Long
      - term debt
(1)
$75,000
$75,000
Bank
      credit facilities
$325,000
$325,000
Amount
      outstanding at end of period
$92,600
$40,250
Weighted
      average interest rate at end of period
5.18
%
6.17
%
NJNG
(2)
Long
      - term debt
(1)
$254,800
$254,800
Bank
      credit facilities
$250,000
$250,000
Amount
      outstanding at end of period
$190,100
$175,700
Weighted
      average interest rate at end of period
4.48
%
5.19
%
NJRES
Bank
      credit facilities
$30,000
$30,000
Amount
      outstanding at end of period
—
$30,000
Weighted
      average interest rate at end of period
—
5.78
%
(1)
Long-term debt excludes lease
      obligations of $59.3 million
and $53.3 million
at
      December 31, 2007 and September 30, 2007,
    respectively.
(2)
The table includes only
      committed credit facilities for short-term borrowings. Also included in
      short-term debt on the Condensed Consolidated balance sheet as of December
      31, 2007 and September 30, 2007, are $6.3 and $10.5 million, respectively,
      related to an uncommitted credit
  facility.
7.
CAP
ITALIZED
      FINANCING COSTS AND DEFERRED
INTEREST
Allowance
for Funds Used During Construction, (AFUDC) included in Utility plant, and
capitalized interest included in Real estate properties and other and
Investments in equity investees on the Condensed Consolidated Balance Sheets,
are as follows:
Three Months
      Ended
December
    31
,
($ in
      thousands)
2007
2006
AFUDC
      – Utility plant
$535
$379
Weighted
      average rate
8.31
%
5.36
%
Capitalized
      interest – Real estate properties and other
$36
$
      43
Weighted
      average interest rates
5.08
%
5.55
%
Capitalized
      interest – Investments in equity investees
$855
—
Weighted
      average interest rates
5.98
%
—
15
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New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Commencing
on October 1, 2007, NJNG is including a capitalized cost of equity, at its
currently allowed return on equity rate of 11.5 percent, for its utility plant
construction as a component of AFUDC. Amounts shown in the table above for the
three months ended December 31, 2006 represent an interest cost component
only.
NJR,
through its CR&R subsidiary, capitalizes interest associated with the
development and construction of its commercial buildings. Interest is also
capitalized associated with the acquisition, development and construction of a
natural gas storage facility through NJR's equity investment in Steckman Ridge
(see
Note 4. Investments in
Equity Investees
).
Pursuant
to a BPU order, NJNG is permitted to recover carrying costs on uncollected
balances related to SBC program costs, which include NJCEP, RAC and USF
expenditures. Accordingly, Other income included $738,000 and $887,000 of
deferred interest related to these SBC program costs for period ended December
31, 2007 and 2006, respectively.
8.
STO
CK-BASED
      COMPENSATION
On
November 14, 2007, the Company granted 41,320 performance units, which are
market condition awards and vest in September 2010, and 41,320 shares of
restricted stock, which vest in equal installments over three years, subject to
certain conditions. On the same date, the Company also granted 23,590 restricted
shares that vest immediately. During the first quarter of fiscal 2008, 11,237
shares were issued pursuant to performance units granted in fiscal 2005 that
were earned as of September 30, 2007.
During
the first three months of fiscal 2008, included in operation and maintenance
expense is $483,000 related to stock based compensation. There is approximately
$5.0 million of deferred compensation expense related to unvested shares,
options and performance units that are expected to be recognized over the next 3
years.
9.
EMP
LOYEE
      BENEFIT PLANS
Pension and Other Postemployment
Benefit Plans (OPEB)
The
components of the net periodic cost for pension benefits, including NJR's
Pension Equalization Plan, and OPEB costs (principally health care and life
insurance) for employees and covered dependents were as follows:
Pension
OPEB
Three Months
      Ended
December
    31,
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
2007
2006
Service
      cost
$   728
$  733
$  488
$  454
Interest
      cost
1,648
1,554
821
757
Expected
      return on plan assets
(2,183
)
(2,052
)
(583
)
(541
)
Recognized
      actuarial loss
275
399
262
266
Prior
      service cost amortization
14
21
20
20
Transition
      obligation amortization
—
—
89
89
Net
      periodic cost
$   482
$  655
$1,097
$1,045
In
fiscal 2008, the Company has no minimum pension funding requirements. The
Company's funding to its OPEB plans is expected to be approximately $1.5 million
in fiscal 2008 and $1.1 million annually, over the next four years. Additional
contributions may be made based on market conditions and various
assumptions.
16
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New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10.
ASS
ET
      RETIREMENT OBLIGATIONS (ARO)
NJR
recognizes AROs related to the costs associated with cutting and capping its
main and service gas distribution pipelines of NJNG, which is required by New
Jersey law when taking such gas distribution pipeline out of
service.
The
following is an analysis of the change in the ARO liability for the period ended
December 31, 2007, in thousands:
Balance
      at October 1, 2007
$23,895
Accretion
350
Additions
—
Retirements
(177
)
Balance at December 31,
      2007
$24,068
Accretion
amounts are not reflected as an expense on NJR's Condensed Consolidated
Statements of Income, but rather are deferred as a regulatory asset and netted
against NJNG's regulatory liabilities, for presentation purposes, on the
Condensed Consolidated Balance Sheet.
11.
ADO
PTION OF
      FIN 48
During
2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109
(FIN 48), which is
effective for the Company in fiscal 2008. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an entity's financial statements in
accordance with FASB Statement No. 109,
Accounting for Income Taxes
(SFAS 109) and prescribes a recognition threshold and measurement
attributes for financial statement disclosure of tax positions taken or expected
to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax
position on the income tax return must be recognized at the largest amount that
is more-likely-than-not to be sustained upon audit by the relevant taxing
authority. An uncertain income tax position will not be recognized if it does
not have a greater than 50 percent likelihood of being sustained. Additionally,
FIN 48 provides guidance on derecognition, declassification and interest and
penalties, among other items.
The
Company adopted the provisions of FIN 48 on October 1, 2007. The total amount of
FIN 48 liabilities as of the date of adoption was $6.5 million, including $4.7
million of uncertain tax liabilities and $1.8 million of interest and penalties.
As a result of the implementation of FIN 48, the Company recognized an
additional $4.3 million as an increase in the liability for unrecognized tax
benefits and interest. The previously recorded amount of $2.2 million, as well
as the additional amount recognized associated with the adoption of FIN 48, are
included as a component of Deferred and accrued taxes in the Current
classification of the Condensed Consolidated Balance Sheets. The following table
represents the increase in liability with respect to the adoption of FIN
48:
($ in
      millions)
As of
      October 1,
2007
Increase
      in Retained Earnings (cumulative effect)
$
1.2
Decrease
      in Deferred income taxes
$
(4.3
)
Increase
      in Deferred and accrued taxes (FIN 48 liability)
$
4.3
There
are $1.7 million of state taxes included in the balance of unrecognized tax
benefits as of October 1, 2007. If they were to be recognized, it would
affect the effective tax rate, as this amount had previously been fully reserved
for, and was fully reflected as a component of current Deferred and accrued
taxes in the Condensed Consolidated Balance Sheets.
17
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New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
There
is $3.1 million included in the balance of unrecognized tax benefits as of
October 1, 2007 that relates to a filing position the Company took concerning
the depreciable life of certain of its fixed assets at NJNG. The Company filed
an automatic change in method of accounting which is currently under audit with
the Internal Revenue Service (IRS). The Company anticipates closing the audit
and settling this issue within the next 12 months. The settlement of this issue
would reduce the FIN 48 reserve by approximately $3.6 million, which includes
associated interest.
The
Company recognizes interest and penalties accrued related to unrecognized tax
benefits as additional tax expense. Upon adoption of FIN 48 on October 1, 2007
the Company had $1.8 million of accrued interest and penalties related to the
above liability computed under FIN 48, which had previously been expensed in the
Condensed Consolidated Statements of Income.
The
Company and one or more of its subsidiaries files income tax returns in the
United States Federal jurisdiction and in the states of New Jersey, New York and
Connecticut. The Company neither files in, nor believes it has a filing
requirement in, any foreign jurisdictions.
The
Company is no longer subject to United States federal income tax examinations
for years prior to fiscal 2004. The IRS commenced an examination of the
Company's fiscal 2005 federal income tax return during the third quarter of
fiscal 2007. The exam is expected to be completed by the end of fiscal
2008.
The
Company is not currently under examination in any state but the periods ended
September 30, 2003 forward are all statutorily open to examination. In New
Jersey, NJNG currently has an open Tax Court case for the periods September 30,
1998 through September 30, 2002, which relates to New Jersey tax apportionment
rules. The Company expects a final tax court ruling related to this case during
fiscal 2008, and the unrecognized benefit of the $1.7 million of state taxes
that is included as part of the entire initial adoption of FIN 48, as described
above.
An
unfavorable ruling would result in a tax, interest and penalty expense of
approximately $2.9 million. This liability has previously been reserved for, and
the tax and interest would be deductible for federal income tax
purposes.
12.
COM
MITMENTS
      AND CONTINGENT LIABILITIES
Cash
Commitments
NJNG
has entered into long-term contracts, expiring at various dates through 2022,
for the supply, storage and delivery of natural gas. These contracts include
current annual fixed charges of approximately $85.7 million at current contract
rates and volumes, which are recoverable through the BGSS.
For
the purpose of securing adequate storage and pipeline capacity, NJRES enters
into storage and pipeline capacity contracts, which require the payment of
certain demand charges by NJRES, in order to maintain the ability to access such
natural gas storage or pipeline capacity, during a fixed time period, which
generally range from one to five years. Demand charges are based on established
rates as regulated by the Federal Energy Regulatory Commission (FERC). These
demand charges represent commitments to pay storage providers or pipeline
companies for the right to store and transport natural gas utilizing their
respective assets. As of December 31, 2007, NJRES had contractual obligations
for demand charges related to storage contracts and pipeline capacity contracts
of $32.1 million and $59.9 million, respectively.
As
of December 31, 2007, there were NJR guarantees covering approximately $352
million of natural gas purchases and demand fee commitments of NJRES and NJNG
not yet reflected in Accounts payable on the Condensed Consolidated Balance
Sheet.
18
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New Jersey Resources
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Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Costs
for storage and pipeline demand fees, included as a component of Gas purchases
on the Condensed Consolidated Statements of Income, are as follows:
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
NJRES
$27.6
$36.8
NJNG
18.7
19.3
Total
$46.3
$56.1
NJNG's
capital expenditures are estimated at $78.6 million for fiscal 2008, of which
approximately $16.4 million has been committed, and consists primarily of its
construction program to support customer growth, maintenance of its distribution
system and replacement needed under pipeline safety regulations.
The
Company's future minimum lease payments under various operating leases are less
than $3.0 million annually for the next five years and $2.2 million in the
aggregate for all years thereafter.
Legal
Proceedings
Manufactured Gas Plant
Remediation
NJNG
is responsible for the remedial cleanup of three Manufactured Gas Plant (MGP)
sites, dating back to gas operations in the late 1800s and early 1900s, which
contain contaminated residues from former gas manufacturing operations. NJNG is
currently involved in administrative proceedings with the New Jersey Department
of Environmental Protection (NJDEP) with respect to two of the sites, as well as
participating in various studies and investigations by outside consultants to
determine the nature and extent of any such contaminated residues and to develop
appropriate programs of remedial action, where warranted, under Administrative
Consent Orders or Memoranda of Agreement with the NJDEP.
NJNG
may, subject to BPU approval, recover its remediation expenditures, including
carrying costs, over rolling 7-year periods pursuant to a remediation adjustment
clause (RAC) approved by the BPU. In October 2007, the BPU approved $14.7
million in eligible costs to be recovered annually for MGP remediation
expenditures incurred through September 30, 2006. As of December 31, 2007, $85.5
million of previously incurred remediation costs, net of recoveries from
customers and insurance proceeds, are included in Regulatory assets on the
Condensed Consolidated Balance Sheet.
In
September 2007, NJNG updated an environmental review of the MGP sites, including
a review of potential liability for investigation and remedial action. NJNG
estimated at the time of the review that total future expenditures to remediate
and monitor the three MGP sites for which it is responsible will range from
approximately $105.3 million to $164.8 million. NJNG's estimate of these
liabilities is based upon known facts, existing technology and enacted laws and
regulations in place when the review was completed. However, NJNG expects actual
costs to differ from these estimates. Where it is probable that costs will be
incurred, but the information is sufficient only to establish a range of
possible liability, and no point within the range is more likely than any other,
it is NJNG's policy to accrue the lower end of the range. Accordingly, NJNG has
recorded an MGP remediation liability and a corresponding Regulatory asset of
$105.3 million on the Condensed Consolidated Balance Sheet. The actual costs to
be incurred by NJNG are dependent upon several factors, including final
determination of remedial action, changing technologies and governmental
regulations, the ultimate ability of other responsible parties to pay and any
insurance recoveries.
NJNG
is presently investigating the potential settlement of alleged Natural Resource
Damage claims that might be brought by the NJDEP concerning the three MGP sites.
NJDEP has not made any specific demands for compensation for alleged injury to
groundwater or other natural resources. NJNG's evaluation of these
potential
19
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New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
claims
is in the early stages, and it is not yet possible to quantify the amount of
compensation, if any, that NJDEP might seek to recover. NJNG anticipates any
costs associated with this matter would be recoverable through the
RAC.
NJNG
will continue to seek recovery of MGP-related costs through the RAC. If any
future regulatory position indicates that the recovery of such costs is not
probable, the related cost would be charged to income in the period of such
determination. However, because recovery of such costs is subject to BPU
approval, there can be no assurance as to the ultimate recovery through the RAC
or the impact on the Company's results of operations, financial position or cash
flows, which could be material.
General
The
Company is party to various other claims, legal actions and complaints arising
in the ordinary course of business. In the Company's opinion, other than as
disclosed above, the ultimate disposition of these matters will not have a
material adverse effect on its financial condition, results of operations or
cash flows.
13.
BUSI
NESS
      SEGMENT DATA
Information
related to the Company's various business segments, which are presented in the
Condensed Consolidated Statements of Cash Flows, is detailed below.
The
Natural Gas Distribution segment consists of regulated energy and off-system,
capacity and storage management operations. The Energy Services segment consists
of unregulated wholesale energy operations. The Retail and Other segment
consists of appliance and installation services, commercial real estate
development, investments and other corporate activities.
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
Operating
      Revenues
Natural
      Gas Distribution
$
284,360
$
239,407
Energy
      Services
520,211
495,787
Retail
      and Other
6,631
2,276
Subtotal
811,202
737,470
Intersegment
      Revenues
(1)
(64
)
(69
)
Total
$
811,138
$
737,401
Depreciation
      and Amortization
Natural
      Gas Distribution
$
9,233
$
8,738
Energy
      Services
53
54
Retail
      and Other
117
110
Total
$
9,403
$
8,902
Operating
      Income
Natural
      Gas Distribution
$
31,602
$
36,716
Energy
      Services
22,563
21,596
Retail
      and Other
372
(3,482
)
Total
$
54,537
$
54,830
Net
      Income
Natural
      Gas Distribution
$
16,670
$
19,908
Energy
      Services
13,150
11,524
Retail
      and Other
365
(1,998
)
Total
$
30,185
$
29,434
(1)
Consists of transactions
      between subsidiaries that are eliminated in
      consolidation.
20
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New Jersey Resources
Corporation
Part
I
NOTES TO CONDENSED UNAUDITED
      CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14.
OT
HER
At
December 31, 2007, there were 27,815,759 shares of common stock outstanding and
the book value per share was $24.01.
IT
EM 2.
      MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS
Management's
Overview
New
Jersey Resources Corporation (NJR or the Company) is an energy services holding
company providing retail natural gas service in New Jersey and wholesale natural
gas and related energy services to customers in states from the Gulf Coast and
Mid-Continent regions to the New England region and Canada through its two
principal subsidiaries, New Jersey Natural Gas (NJNG) and NJR Energy Services
(NJRES).
Comprising
the Natural Gas Distribution segment, NJNG is a natural gas utility that
provides regulated retail natural gas service in central and northern New Jersey
and also participates in the off-system sales and capacity release markets. NJNG
is regulated by the New Jersey Board of Public Utilities (BPU).
NJRES
maintains and transacts around a portfolio of physical assets consisting of
natural gas storage and transportation contracts. In addition, NJRES provides
wholesale energy services to non-affiliated utility and energy companies. NJRES
comprises the Energy Services segment.
The
Retail and Other segment includes NJR Home Services (NJRHS), which provides
service, sales and installation of appliances; NJR Energy (NJRE), an investor in
energy-related ventures, most significantly through NJNR Pipeline, which holds
the Company's 5.53 percent interest in Iroquois Gas and Transmission System, LP
(Iroquois), a 412-mile natural gas pipeline from the New York-Canadian border to
Long Island, New York, and NJR Steckman Ridge Storage Company, which has a 50
percent equity ownership interest in Steckman Ridge GP, LLC and Steckman Ridge,
LP (collectively, Steckman Ridge), a planned 17.7 billion cubic foot (Bcf)
natural gas storage facility, with up to 12 Bcf working capacity, that is being
jointly developed and constructed with a partner in western Pennsylvania; NJR
Investment, which makes energy-related equity investments; Commercial Realty and
Resources (CR&R), which holds and develops commercial real estate; and NJR
Service Company, which provides support services to the various NJR
businesses
NJR
has restated the financial statements for the period ended December 31, 2006
related to a change in accounting for certain derivative financial instruments.
Refer to
Note 1. General,
herein.
Net
income by business segment is as follows:
Three Months
      Ended
December
    31,
($ in thousands)
2007
2006
Net
      Income
Natural
      Gas Distribution
$16,670
55
%
$19,908
68
%
Energy
      Services
13,150
44
11,524
39
Retail
      and Other
365
1
(1,998
)
(7
)
Total
$30,185
100
%
$29,434
100
%
21
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New Jersey Resources
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Part
I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
NJRES
and NJR Energy account for certain of its derivative instruments (financial
futures, swaps and options) used to economically hedge the forecasted purchase,
sale and transportation of natural gas at fair value, as required under
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative
Instruments and Hedging Activities
(as amended and interpreted, SFAS
133). In addition, effective October 1, 2007, NJRES is no longer electing the
"normal purchase normal sale" (NPNS) scope exception of SFAS 133 for contracts
that result in the physical purchase or sale of natural gas at NJRES. As such,
any new contracts to purchase or sell the natural gas commodity are accounted
for as derivatives, at fair value, at NJRES.
The
change in fair value of these derivative instruments at NJRES and NJR Energy
over periods of time, referred to as unrealized gains or losses, can result in
substantial volatility in reported net income under generally accepted
accounting principles of the United States of America (GAAP). When a financial
instrument settles the result is the realization of these gains or losses. NJRES
utilizes certain financial instruments to economically hedge inventory placed
into storage that will be sold at a later date, all of which were contemplated
as part of an entire forecasted transaction. GAAP requires that when a financial
instrument that is economically hedging natural gas that has been placed into
inventory, but not yet sold, has been settled, the realized gain or loss
associated with that settlement must be reflected currently in the income
statement. While NJRES will recognize the same economic impact from the entire
planned transaction, this also leads to additional volatility in NJRES'
earnings.
Unrealized
losses and gains at NJRES and NJR Energy are the result of changes in the fair
value of natural gas futures and basis swaps, as applicable, used to
economically hedge future natural gas sales, purchases and transportation.
Additionally NJRES records unrealized gains and losses on physical natural gas
commodity contracts entered into after September 30, 2007. Realized gains and
losses at NJRES are the result of the settlement of natural gas futures
instruments used to economically hedge natural gas purchases in inventory that
have not been sold.
Included
in Net income in the table above are unrealized (losses) and gains in the Energy
Services segment of $(2.9) million and $4.5 million, after taxes, for the
three-month period ended December 31, 2007 and 2006, respectively. Also included
in Net income in the table above are realized (losses) of $(3.0) million and
$(759,000), after taxes, for the three-month period ended December 31, 2007 and
2006, respectively, related to derivative instruments that have settled that are
designed to economically hedge natural gas that is still in storage
inventory.
Included
in Net income above are unrealized (losses) in the Retail and Other segment of
$(180,000) and $(2.4) million, after taxes, for the period ended December 31,
2007 and 2006, respectively.
Natural Gas Distribution
Segment
Natural
Gas Distribution operations have been managed with the goal of growing
profitably through several key initiatives including:
Ÿ
Assessing
      the market and timing with respect to filing for a base rate increase,
      which takes into account many factors, including, but not limited to,
      earning a reasonable rate of return on the investments that have been
      constructed in the gas distribution system, as well as recovery of all
      prudently incurred costs in order to provide reliable service throughout
      NJNG's service territory.
Based
      upon increases in NJNG's operating, maintenance and capital costs, NJNG
      petitioned the BPU, on November 20, 2007, to increase base rates for its
      natural gas delivery service by approximately $58.4 million, including a
      return on NJNG's equity component of 11.375 percent. This base rate case
      filing is consistent with NJNG's objectives of providing safe and reliable
      service to its customers and earning a market-based return. Based upon
      statutory time frames and potential regulatory lag, it is unlikely that
      any modification to its delivery rates would become effective during
      fiscal 2008;
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Part
I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Ÿ
Working
      with the BPU and New Jersey Department of the Public Advocate, Rate
      Counsel, for the development of the decoupling of the impact of customer
      usage on utility gross margin, which has allowed for the implementation of
      the Conservation Incentive Program (CIP). The CIP allows NJNG to promote
      conservation programs to its customers while maintaining protection of its
      utility gross margin associated with reduced customer usage. CIP usage
      differences are calculated annually and are recovered one year following
      the end of the CIP usage year;
Ÿ
Managing
      its customer growth, which is expected to range from 1.6 to 1.8 percent
      annually;
Ÿ
Generating
      earnings from various BPU-authorized gross margin-sharing incentive
      programs; and
Ÿ
Managing
      the volatility of wholesale natural gas prices through a hedging program
      designed to keep customers' prices as stable as
  possible.
In
conducting NJNG's business, management focuses on factors it believes may have
significant influence on its future financial results. NJNG's policy is to work
with all stakeholders, including customers, regulators and policymakers, to
achieve favorable results. These factors include the rate of NJNG's customer
growth in its service territory, which can be influenced by general economic
conditions as well as political and regulatory policies that may impact the new
housing market. A portion of NJNG's customer growth comes from the conversion
market, which is influenced by the delivered cost of natural gas compared with
competing fuels, interest rates and other economic conditions.
The
CIP pilot program was implemented effective October 1, 2006 to allow NJNG to
recover utility gross margin variations related to both weather and customer
usage. Recovery of such margin variations is subject to additional conditions
including an earnings test, which includes a return on equity component of 10.5
percent, and an evaluation of Basic Gas Supply Service (BGSS)-related savings
achieved. An annual review of the CIP must be filed in June of each year,
coincident with NJNG's annual BGSS filing. In October 2007, the BPU
provisionally approved NJNG's initial CIP recovery rates, which are designed to
recover approximately $15.6 million of accrued margin amounts.
In
conjunction with the CIP, NJNG is required to administer programs that promote
customer conservation efforts. As of December 31, 2007 and
September 30, 2007, the obligation to fund these conservation programs was
recorded at its present value of $1.2 million and $1.4 million, respectively on
the Condensed Consolidated Balance Sheets.
Prior
to fiscal 2007, the impact of weather was mitigated by a Weather Normalization
Clause (WNC), which was suspended with the commencement of the CIP. In October
2007, the BPU approved the full recovery of $8.1 million of previously deferred
amounts related to the WNC.
Energy Services
Segment
NJRES
provides unregulated wholesale energy services, including base load natural gas,
peaking and balancing services, utilizing physical assets it controls through
natural gas pipeline transportation and storage contracts, as well as providing
asset management services to customers in states from the Gulf Coast and
Mid-continent regions to the Appalachian and Northeast regions and
Canada.
23
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
NJRES
incorporates the following elements to provide for growth, while focusing on
maintaining a low-risk operating and counterparty credit profile:
Ÿ
Providing
      natural gas portfolio management services to nonaffiliated utilities and
      electric generation facilities;
Ÿ
Leveraging
      transactions for the delivery of natural gas to customers by aggregating
      the natural gas commodity costs and transportation costs in order to
      minimize the total cost required to provide and deliver natural gas to
      NJRES' customers by identifying the lowest cost alternative with the
      natural gas supply, transportation availability and markets to which NJRES
      is able to access through its business footprint and contractual asset
      portfolio;
Ÿ
Identifying
      and benefiting from variations in pricing of natural gas transportation
      and storage assets due to location or timing differences of natural gas
      prices to generate gross margin; and
Ÿ
Managing
      economic hedging programs that are designed to mitigate adverse market
      price fluctuations in natural gas transportation and storage
      commitments.
NJRES
views "financial margin" as its key financial measurement metric. NJRES'
financial margin represents revenues earned from the sale of natural gas less
costs of natural gas sold, transportation and storage, and excludes any
accounting impact from the change in fair value of derivative instruments
designed to hedge the economic impact of its transactions that have not been
settled, which represent unrealized gains and losses, and realized gains and
losses associated with financial instruments economically hedging natural gas in
storage and not yet sold.
NJRES
has built a portfolio of customers including local distribution companies,
industrial companies, electric generators and retail aggregators. Sales to these
customers have allowed NJRES to leverage its transportation and storage capacity
and manage sales to these customers in an aggregate fashion. This strategy
allows NJRES to extract more value from its portfolio of natural gas storage and
pipeline transportation capacity through the arbitrage of pricing differences as
a result of locational differences or over different periods of
time.
NJRES
also focuses on creating value from underutilized natural gas assets, which are
typically amassed through contractual rights to natural gas transportation and
storage capacity. NJRES has developed a portfolio of natural gas storage and
transportation capacity in states in the Northeast, Gulf Coast, Mid-continent
and Appalachian regions and eastern Canada. These assets become more valuable
when prices change between these areas and across time periods. NJRES seeks to
optimize this process on a daily basis as market conditions change by evaluating
all the natural gas supplies, transportation and opportunities to which it has
access, to find the most profitable alternative to serve its various
commitments. This enables NJRES to capture geographic pricing differences across
these various regions as delivered natural gas prices change as a result of
market conditions. NJRES focuses on earning a financial margin on a single
original transaction and then utilizing that transaction, and the changes in
prices across the regions or across time periods, as the basis to further
improve the initial result.
In
a similar manner, NJRES participates in natural gas storage transactions where
it seeks to identify pricing differences that occur over time, as prices for
future delivery periods at many different delivery points, are readily
available. For example, NJRES generates financial margin by locking in the
differential between purchasing natural gas at a low current or future price
and, in a related transaction, selling that natural gas at a higher current or
future price, all within the constraints of its credit and contracts policies.
Through the use of transportation and storage services, NJRES is able to
generate financial margin through pricing differences that occur over the
duration of time the assets are held.
NJRES'
portfolio management customers include nonaffiliated utilities and electric
generation plants. Services provided by NJRES include optimization of
underutilized natural gas assets and basic gas supply functions.
24
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New Jersey Resources
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Part
I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
NJRES
also participates in park-and-loan transactions with pipeline counterparties,
where NJRES will borrow natural gas when there is an opportunity to capture
arbitrage value. In these cases, NJRES evaluates the economics of the
transaction to determine if it can capture pricing differentials in the
marketplace in order to be able to generate financial margin. In evaluating
these transactions NJRES will compare the fixed fee it will pay and the
resulting spread it can generate when considering the amount it will receive to
sell the borrowed gas to another counterparty in relation to the cost it will
incur to purchase the gas at a later date for return back to the pipeline. When
the transaction allows NJRES to generate a financial margin, NJRES will fix the
financial margin by economically hedging the transaction with natural gas
futures.
In
conducting its business, NJRES mitigates risk by following formal risk
management guidelines, including trading limits, approval processes, segregation
of duties, and formal contract and credit review and approval procedures. NJRES
continuously monitors and seeks to reduce the risk associated with various
counterparties credit exposure. The Risk Management Committee (RMC) of NJR,
oversees compliance with these established guidelines.
Retail and Other
Segment
In
the Retail and Other segment, NJR utilizes a subsidiary, NJR Energy Holdings, to
develop its investments in natural gas "mid-stream" assets. Mid-stream assets
represent natural gas transportation and storage facilities. NJR believes that
acquiring, owning and developing these mid-stream assets, which generally have a
regulated rate or tariff structure, can provide a significant growth opportunity
for the Company. To that end, NJR has acquired an interest in Iroquois and
Steckman Ridge, which is currently under development, and is actively pursuing
other potential opportunities that meet its investment and development criteria.
Other businesses in the Retail and Other segment include NJRHS, which provides
service, sales and installation of appliances to over 149,000 customers, and is
focused on growing its installation business and expanding its service contract
customer base, and CR&R, which seeks additional opportunities to enhance the
value of its undeveloped land.
The
financial results of Retail and Other consist primarily of the operating results
of NJRHS and equity in earnings attributable to the Company's equity investment
in Iroquois as well as to investments made by NJR Energy, an investor in other
energy-related ventures through its operating subsidiaries.
As
of December 31, 2007, excluding capitalized interest and other direct costs, NJR
has invested $58 million in the Steckman Ridge natural gas storage facility.
Project costs related to the development of the storage facility are expected to
be approximately $250 million of which NJR is responsible for 50 percent, or
$125 million. NJR anticipates that Steckman Ridge will be able to secure
non-recourse financing for a portion of the construction and development of its
facilities, thereby potentially reducing the expected funding obligation of NJR.
There can be no assurances that such non-recourse project financing will be
secured or available for Steckman Ridge.
Critical Accounting
Policies
A
summary of NJR's critical accounting policies is included in
Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations
of its Annual
Report on Form 10-K for the period ended September 30, 2007. NJR's critical
accounting policies have not changed materially from those reported in the 2007
Annual Report on Form 10-K with the exception of the following:
Derivative Instrument
s
Derivative
activities are recorded in accordance with SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities,
as amended (SFAS 133), under which
NJR records the fair value of derivatives held as assets and liabilities. NJR's
unregulated subsidiaries record changes in the fair value of its derivative
instruments in Gas purchases or Operating revenues, as appropriate, on the
Condensed Consolidated Statements of Income.
25
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
In
providing its unregulated wholesale energy services, NJRES also enters into
physical contracts to buy and sell natural gas. For contracts entered into prior
to October 1, 2007, NJRES elected to use the "normal purchase normal sale" scope
exception (NPNS or normal) under SFAS 133 since the contracts provided for the
purchase or sale of natural gas with the intention of delivering the natural gas
in quantities expected to be used or sold by NJRES over a reasonable period of
time in the normal course of its business. The Company continues to believe that
the conditions that originally qualified these contracts as normal continue to
exist, and, accordingly, NJRES will record the related liabilities incurred and
assets acquired under these remaining contracts when title to the underlying
natural gas commodity passes under accrual based accounting.
Effective
October 1, 2007, the Company has decided to discontinue using the NPNS exception
for any new physical commodity contracts entered into by NJRES. The criteria for
designating contracts as normal includes an assessment of the probability of
delivery at inception while considering certain factors such as expected future
demand. NJRES will continue to enter into these contracts with the intention of
physically delivering the natural gas; however, NJRES has determined that the
probability of net settling these contracts for cash may be greater than had
previously been experienced. As a result, commencing with contracts entered into
subsequent to September 30, 2007, NJRES will treat these contracts as
derivatives and record them at fair value in the Condensed Consolidated Balance
Sheet, with changes in fair value being recorded as a component of Operating
revenues in the Condensed Consolidated Statements of Income.
Capitalized Financing
Costs
NJNG
capitalizes an allowance for funds used during construction (AFUDC), as a
component of Utility plant in the Condensed Consolidated Balance Sheets.
Commencing October 1, 2007, in addition to cost of debt, AFUDC also includes the
estimated cost of equity funds used to finance construction on its natural gas
transmission and distribution system, which is currently established through
allowed rates at 11.5 percent. The debt portion of AFUDC is recorded as a
reduction to Interest expense and the equity portion is recorded in Other income
in the Condensed Consolidated Statements of Income. Under regulatory rate
practices and in accordance with SFAS No. 71,
Accounting for the Effects of
Certain Types of Regulation
, NJNG fully recovers both components of AFUDC
through base rates.
Recently Issued Accounting
Standards
Refer
to
Note 1. General
, for
discussion of recently issued accounting standards.
Results of
Operations
Consolidated
Net
income for the three-month period ended December 31, 2007 increased by 2.6
percent to approximately $30.2 million, compared with net income of
approximately $29.4 million for the same period in fiscal 2007. Basic and
diluted earnings per share increased by 2.8 percent to $1.09 and $1.08, compared
with $1.06 and $1.05, respectively.
The
increase in net income was due primarily to the following:
Ÿ
increased
      gross margin and lower interest expense at NJRES due to decreased
      short-term debt levels used to fund natural gas storage purchases for
      inventory;
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Ÿ
lower
      unrealized losses at NJR Energy as a result of fluctuations in market
      prices and mix of open financial positions economically hedging forecasted
      natural gas purchases and sales; partially offset by
Ÿ
lower
      gross margin from incentive-based programs and increased operation and
      maintenance expense at NJNG.
The
Company's Operating revenues and Gas purchases are as follows:
Three Months
      Ended
December
    31,
($ in
      Thousands)
2007
2006
% Change
Operating
      revenues
$
811,138
$
737,401
10.0
%
Gas
      purchases
$
684,694
$
621,935
10.1
%
Operating
revenues increased $73.7 million for the three months ended December 31, 2007,
compared with the same period of the prior fiscal year due primarily
to:
Ÿ
increased
      NJNG firm sales as a result of it being 13.4 percent colder than the same
      period of the prior fiscal year, and lower BGSS customer refunds provided
      to residential and small commercial customers in fiscal 2008 compared to
      fiscal 2007; and
Ÿ
increased
      revenues at NJRES due to higher sales volumes and prices, along with the
      commencement of including the change in fair value of physical commodity
      contracts beginning in fiscal 2008.
These
same factors resulted in an increase in Gas purchases of $62.8 million for the
three months ended December 31, 2007, as compared to the same periods in the
prior fiscal year, which includes the impact of a decrease of $19 million in
unrealized gains at NJRES that resulted in increased gas purchases.
Natural Gas Distribution
Operations
NJNG
is a local natural gas distribution company that provides regulated retail
energy services to approximately 481,000 residential and commercial customers in
central and northern New Jersey and participates in the off-system sales and
capacity release markets.
NJNG's
business is seasonal by nature, as weather conditions directly influence the
volume of natural gas delivered. Specifically, customer demand substantially
increases during the winter months when natural gas is used for heating
purposes. As a result, NJNG receives most of its gas distribution revenues
during the first and second fiscal quarters and is subject to variations in
earnings and working capital during the year.
The
Electric Discount and Energy Competition Act (EDECA) provides the framework for
New Jersey's energy markets, which are open to competition from other energy
suppliers. Currently, NJNG's residential markets are open to competition, and
its rates are segregated between BGSS (natural gas commodity) and delivery
(i.e., transportation) components. NJNG earns no utility gross margin on the
commodity portion of its natural gas sales. NJNG earns utility gross margin
through the delivery of natural gas to its customers. Under an existing order
from the BPU, BGSS can be provided by suppliers other than the state's natural
gas utilities.
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
NJNG's
financial results are as follows:
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
Utility
      Gross Margin
Operating
      revenues
$
284,360
$
239,407
Less:
Gas
      purchases
190,148
150,993
Energy
      and other taxes
16,363
12,520
Regulatory
      rider expense
12,165
9,466
Total
      Utility Gross Margin
$
65,684
$
66,428
Utility
      Gross Margin
Residential
      and commercial
$
59,196
$
58,368
Transportation
4,934
4,566
Total
      Utility Firm Gross Margin
64,130
62,934
Incentive
      programs
1,420
3,278
Interruptible
134
216
Total
      Utility Gross Margin
65,684
66,428
Operation
      and maintenance expense
23,879
20,255
Depreciation
      and amortization
9,233
8,738
Other
      taxes not reflected in utility gross margin
970
719
Operating
      Income
$
31,602
$
36,716
Other
      income
1,232
1,047
Interest
      charges, net
6,119
5,393
Income
      tax provision
10,045
12,462
Net
      Income
$
16,670
$
19,908
Utility Gross
Margin
NJNG's
utility gross margin is defined as natural gas revenues less natural gas
purchases, sales tax, a Transitional Energy Facilities Assessment (TEFA) and
regulatory rider expenses. Management believes that utility gross margin
provides a more meaningful basis than revenue for evaluating utility operations
since natural gas costs, sales tax, TEFA and regulatory rider expenses are
included in operating revenue and passed through to customers and, therefore,
have no effect on utility gross margin. This definition of utility gross margin
may not be comparable to the definition of gross margin used by others in the
natural gas distribution business and other industries.
Natural
gas costs are charged to operating expenses on the basis of therm sales at the
prices in NJNG's BGSS tariff approved by the BPU. The BGSS tariff rate includes
projected natural gas costs, net of supplier refunds, the impact of hedging
activities and credits from non-firm sales and transportation activities. Any
underrecoveries or overrecoveries from the projected amounts are deferred and
reflected in the BGSS tariff rate in subsequent years.
TEFA,
which is included in Energy and other taxes on the Condensed Consolidated
Statements of Income, is calculated on a per-therm basis and excludes sales to
cogeneration facilities, other utilities and off-system sales. TEFA represents a
regulatory allowed assessment imposed on all energy providers in the state of
New Jersey, as TEFA has replaced the previously used utility gross receipts tax
formula.
Regulatory
rider expenses consist of recovery of state-mandated programs and the
remediation adjustment clause costs. These expenses are offset by corresponding
revenues and are calculated on a per-therm basis.
28
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
NJNG's
Operating revenues and Gas purchases for the three months ended December 31,
2007 increased $45.0 million, and $39.2 million, respectively, compared
with the same period in the prior fiscal year due primarily to weather being
13.4 percent colder than the same period in the prior fiscal year. The increase
in Operating revenues and Gas purchases was also affected by the BGSS customer
refunds provided to residential and small commercial customers of $32.1 million
and $55.1 million, inclusive of sales tax refunds of $2.1 million and $3.6
million, in December 2007 and December 2006, respectively. In both fiscal years,
these customer refunds were the result of anticipated reductions in the cost to
acquire wholesale natural gas, as compared to the current established rate
included in NJNG's BGSS tariff.
Sales
tax and TEFA, which are presented as both components of Revenues and Operating
Expenses in the Condensed Consolidated Statements of Income, totaled $16.4
million and $12.5 million for the three months ended December 31, 2007 and 2006,
respectively. The increase is due primarily to an increase in operating revenue
from firm sales of $42 million for the three months ended December 31,
2007.
Regulatory
rider expenses totaled $12.2 million and $9.5 million for the three months ended
December 31, 2007 and 2006, respectively. The increase in regulatory rider
expenses is due primarily to an increase in firm throughput of 2.4 Bcf for the
three months ended December 31, 2007 as compared to the three months ended
December 31, 2006, which was due primarily to an increase in usage as a result
of the previously mentioned colder weather.
Utility
gross margin is comprised of three major categories:
Ÿ
Utility
      Firm Gross Margin, which is derived from residential and commercial
      customers who receive natural gas service from NJNG through either sales
      or transportation tariffs;
Ÿ
Incentive
      programs, where margins generated or savings achieved from BPU-approved
      off-system sales, capacity release, Financial Risk Management (defined in
      Incentive Programs, below) or storage incentive programs are shared
      between customers and NJNG; and
Ÿ
Utility
      gross margin from interruptible customers, which is generated from large
      commercial and industrial customers who receive non-firm natural gas
      service at lower rates, and is subject to BPU-approved incentives through
      October 31, 2007.
Utility Firm Gross
Margin
Effective
October 1, 2006, the BPU approved the CIP to encourage energy savings while
allowing NJNG to recover the necessary costs of operations. The three-year pilot
program eliminates the disincentive to promote conservation and energy
efficiency, since utility gross margin is no longer directly linked to customer
usage. The CIP tariff normalizes NJNG's utility gross margin recoveries for
variances not only in weather but also other factors affecting usage, including
customer conservation. Recovery of utility gross margin for the non-weather
variance through the CIP is limited to the amount of certain gas supply cost
savings achieved, and is subject to an earnings test, which contains a return on
equity component of 10.5 percent.
Customers
switching between sales service and transportation service affect the components
of utility gross margin from firm customers. NJNG's total utility gross margin
is not negatively affected by customers who use its transportation service and
purchase natural gas from another supplier because its tariff is designed so
that no profit is earned on the commodity portion of sales to firm customers.
All customers who purchase natural gas from another supplier continue to use
NJNG for transportation service.
29
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New Jersey Resources
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Total
utility firm gross margin increased $1.2 million, or 1.9 percent, for the three
months ended December 31, 2007, as compared to the same period in the prior
fiscal year, due primarily to an increase in residential customers along with a
slight increase in transport customer margin. Gross margin from the commercial
customers remained relatively consistent with the same period in the prior
fiscal year.
The
weather for the three months ended December 31, 2007 was 8.2 percent warmer than
normal, which resulted in an accrual of utility gross margin under the CIP of
$2.9 million, compared with 18.3 percent warmer than normal weather for the same
period last fiscal year, which resulted in an accrual of utility gross margin of
$8.0 million.
In addition,
customer usage was lower than the established benchmark
during fiscal
2008
,
which resulted in an additional accrual of utility gross margin under the CIP of
$
3.2
million
compared to $3.3
million in fiscal 2007
.
For
the period ended December 31, 2007, NJNG had 9,324 and 8,551 residential
customers and 4,889 and 4,319 commercial customers using its transportation
service at December 31, 2007 and 2006, respectively. The increase in
transportation customers for the period ended December 31, 2007 was due
primarily to an increase in marketing activity by third party natural gas
service providers in NJNG's service territory.
Utility
firm gross margin from transportation service remained relatively flat at $4.9
million for the three months ended December 31, 2007, as compared to 4.6 million
for the three months ended December 31, 2006. NJNG transported 2.8 Bcf for its
firm customers in the three months ended December 31, 2007, compared with 2.5
Bcf for the same period ended December 31, 2006.
NJNG
added, in total, 1,723 and 2,614 new customers during the three months ended
December 31, 2007 and 2006, respectively. In addition, NJNG converted 104 and 69
existing customers to natural gas heat and other services during the same
periods for fiscal 2008 and 2007, respectively. This customer growth represents
an estimated annual increase of approximately 0.24 Bcf in sales to firm
customers, assuming normal weather and usage.
Incentive
Programs
To
reduce the overall cost of its natural gas supply commitments, NJNG has entered
into contracts to sell natural gas to wholesale customers outside its franchise
territory when the natural gas is not needed for system requirements. These
off-system sales enable NJNG to spread its fixed demand costs, which are charged
by pipelines to access their supplies year round, over a larger and more diverse
customer base. NJNG also participates in the capacity release market on the
interstate pipeline network when the capacity is not needed for its firm system
requirements. NJNG retains 15 percent of the utility gross margin from these
sales, with 85 percent credited to firm customers through the BGSS.
The
Financial Risk Management (FRM) program is designed to provide price stability
to NJNG's natural gas supply portfolio. The FRM program includes an incentive
mechanism designed to encourage the use of financial instruments to hedge NJNG's
natural gas costs. As of November 1, 2007, NJNG retains 15 percent of the
utility gross margin, with 85 percent credited to firm customers through the
BGSS. Previously, NJNG customers were credited 80 percent and NJNG retained 20
percent of the gains and losses.
The
storage incentive program shares gains and losses on an 80 percent and 20
percent basis between customers and NJNG, respectively. This program measures
the difference between the actual cost of natural gas injected into storage and
a benchmark applicable to the April-through-October injection
season.
30
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
NJNG's
incentive programs totaled 9.7 Bcf and generated $1.4 million of utility gross
margin for the three months ended December 31, 2007, compared with 10.6 Bcf and
$3.3 million of utility gross margin during the same period last fiscal year.
Utility gross margin from incentive programs comprised 2.2 percent of total
utility gross margin at December 31, 2007 and 4.9 percent of total utility gross
margin for the same period in fiscal 2007, respectively. The decrease in utility
gross margin was due primarily to:
Ÿ
a
      decrease in margin from the storage program as a result of timing
      variations of storage incentive transactions;
Ÿ
a
      decrease in margin from the FRM program as a result of natural gas option
      spreads that were lower in the three months ended December 31, 2007 as
      compared with the three months ended December 31, 2006, coupled with
      slightly decreased volumes and a decrease in the sharing percentage;
      slightly offset by
Ÿ
an
      increase in higher average sales prices offset by a decrease in sales
      volumes, which resulted in a net increase in off system sales
      margin.
New
York Mercantile Exchange (NYMEX) settlement prices for natural gas are a general
indication of the monthly market movements. NYMEX prices have increased by 6.2
percent to an average of $6.965/dth for the three months ended December 31,
2007, compared with $6.557/dth for the same period of the prior fiscal year,
while the average off-system price increased by 12 percent to an average of
$7.934/dth during the period ended December 31, 2007 compared to $7.083/dth in
the same period last fiscal year.
Interruptible Tariff
Revenues
NJNG
serves 45 customers through interruptible sales and/or transportation tariffs.
Sales made under the interruptible sales tariff are priced on market-sensitive
energy parity rates. Although therms sold and transported to interruptible
customers represented 5.4 percent of total throughput for the three months ended
December 31, 2007, and 4.0 percent of the total throughput during the same
period last fiscal year, they accounted for less than 1 percent of the total
utility gross margin in each year due to the sharing formulas that govern these
sales through October 2007.
Under
these formulas, NJNG retains 10 percent of the utility gross margin from
interruptible sales and 5 percent of the utility gross margin from
transportation sales, with 90 percent and 95 percent, respectively, credited to
firm sales customers through the BGSS. Interruptible sales were 0.7 Bcf and 0.2
Bcf for the three months ended December 31, 2007 and 2006, respectively. In
addition, NJNG transported 0.9 Bcf for each of the three months ended December
31, 2007 and 2006, respectively, for its interruptible customers. The agreement
with the BPU approved on October 3, 2007, included the termination of the
incentive programs related to interruptible sales, on-system interruptible
transportation and sales to certain electric generation facilities effective
November 1, 2007.
Operation and Maintenance
Expense
Operation
and maintenance expense increased $3.6 million, or 17.9 percent, during the
three months ended December 31, 2007, as compared with the same period last
fiscal year, due primarily to:
Ÿ
higher
      compensation costs of $2.7 million due primarily to an increases in the
      number of employees and overtime labor as well as annual wage
      increases;
Ÿ
an
      increase in the bad debt reserves of $229,000 as a result of an increase
      in operating revenue that result in a change in the nature of customer
      accounts receivable; and
Ÿ
an
      increase in materials and supplies expense of $329,000 due primarily to an
      increase in high pressure meter
relocations.
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Operating
Income
Operating
income decreased $5.1 million, or 13.9 percent, for the three months ended
December 31, 2007 as compared with the same period last fiscal year, due
primarily to:
Ÿ
a
      decrease in margin from incentive programs of $1.9 million as discussed
      above;
Ÿ
an
      increase in depreciation expense of $495,000, as a result of greater
      utility plant being placed into service; and
Ÿ
an
      increase in Operations and maintenance expense in the amount of $3.6
      million, as discussed above; partially offset by
Ÿ
an
      increase in firm margin in the amount of $1.2 million as discussed
      above.
Interest
Charges
Interest
charges increased $726,000 for the three months ended December 31, 2007 compared
with the same period last fiscal year, due primarily to:
Ÿ
an
      increase in BGSS interest of $194,000 due to customers balances associated
      with overrecovered gas costs;
Ÿ
an
      increase of $119,000 in short-term interest due to higher average balances
      on short-term debt offset by lower average interest rates;
    and
Ÿ
an
      increase of $217,000 associated with reduced amounts capitalized under
      NJNG's new AFUDC accounting policy effective October 1, 2007. As a result
      of now including a cost of equity component in its AFUDC calculation, the
      amount of interest capitalized for AFUDC purposes is calculated using a
      lower basis, as compared with the prior period, thereby causing the
      increase in interest expense.
Net
Income
Net
income decreased $3.2 million, or 16.3 percent, to $16.7 million from $19.9
million in the three months ended December 31, 2007 and 2006, respectively,
primarily as a result of lower operating income of $5.1 million, as described
above, offset by lower income tax expense of $2.4 million.
Energy Services
Operations
NJRES
utilizes contractual assets that it controls for natural gas storage and
pipeline transportation to meet its various sale and delivery commitments to its
customers. NJRES purchases natural gas predominantly in the Gulf region of the
United States and Canada, and transports that gas, through the use of pipeline
contracts to which it has reserved capacity through the payment of a fixed
demand charge, to either storage facilities that it has reserved, primarily in
the Appalachian, Mid-Continent and Gulf regions of the United States and Canada
or directly to customers in various market areas including the Northeastern
region of the United States and eastern Canada.
NJRES
enters into contracts for delivery of physical natural gas and also enters into
derivative financial contracts at advantageous prices to establish an initial
financial margin for each of its forecasted transactions. Through the use of its
contracts for natural gas storage and pipeline capacity, NJRES is able to take
advantage of pricing differences between geographic locations, commonly referred
to as "locational spreads," as well as over
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
different
time periods, for the delivery of natural gas to its customers, thereby
improving the initially established financial margin result. NJRES utilizes
financial futures, forwards and swap contracts to economically fix and protect
the cash flows surrounding these transactions.
Predominantly
all of NJRES' purchases and sales result in the physical delivery of natural
gas, and therefore, NJRES has elected the "normal purchase normal sale" scope
exception of SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities
, as amended (SFAS 133), for all
physical commodity contracts entered into prior to October 1, 2007, under which
related liabilities incurred and assets acquired under these contracts are
recorded when title to the underlying commodity passes. For all physical
commodity contracts entered into subsequent to September 30, 2007, NJRES has
elected to not use the normal purchase normal sale scope exception of SFAS 133,
and records these physical commodity contracts at fair value on the Condensed
Consolidated Balance Sheets. All changes in the fair value of physical commodity
contracts entered into subsequent to October 1, 2007 are recorded as part of
Operating revenues in the Condensed Consolidated Statements of
Income.
The
changes in fair value of NJRES' financial instruments, which are financial
futures, options, and swap contracts, are recognized in the Condensed
Consolidated Statements of Income, as a component of Gas purchases.
NJRES'
financial and physical contracts will result, over time, in earning a gross
margin on the entire transaction. For financial reporting purposes under GAAP,
the change in fair value associated with derivative instruments used to
economically hedge these transactions are recorded as a component of Operating
revenues or Gas purchases in the Condensed Consolidated Statements of Income, as
appropriate, during the duration of the financial instrument or commodity
contract. These changes in fair value are referred to as unrealized gains and
losses. In other instances, certain financial contracts designed to economically
fix or hedge the price of natural gas that is purchased and placed into storage,
to be sold at a later date, settle and result in realized gains, which are
recorded as a component of Gas purchases in the Condensed Consolidated
Statements of Income.
These
unrealized gains or losses from the change in fair value of unsettled financial
instruments and physical commodity contracts, or realized gains or losses
related to financial instruments that economically hedge natural gas inventory
that has not been sold as part of a planned transaction, cause large variations
in the reported gross margin and earnings of NJRES. NJRES will continue to earn
the same amount of gross margin over the time period of the forecasted
transaction; however, gross margin or earnings during periods prior to
transaction settlement will not reflect the underlying economic
result.
NJRES
expenses its demand charges, which represent the right to use natural gas
pipeline and storage capacity assets of a third-party for a fixed period of
time, ratably over the term of the related natural gas pipeline or storage
contract.
NJRES'
financial results are summarized as follows:
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
Operating
      revenues
$
520,211
$
495,787
Gas
      purchases
494,546
470,942
Gross
      margin
25,665
24,845
Operation
      and maintenance expense
2,840
3,003
Depreciation
      and amortization
53
54
Other
      taxes
209
192
Operating
      income
22,563
21,596
Other
      income
130
135
Interest
      charges, net
877
1,711
Income
      tax provision
8,666
8,496
Net
      income
$
13,150
$
11,524
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Gross
margin for the three months ended December 31, 2007 remained relatively
consistent in comparison with the same period in the prior fiscal year. NJRES
incurred derivative losses of $(10.1) million and gains of $6.8 million for the
three months ended December 31, 2007 and 2006, respectively, due primarily to
fluctuations in market prices and portfolio mix of open trade positions that
reduced the unrealized portion of financial derivative gains from $8.0 million
in the prior fiscal year period to an unrealized loss of $(7.0) million in the
current fiscal year period. These losses on financial derivatives were partially
offset by the unrealized gains associated with the change in fair value of
physical commodity forward positions of $2.0 million, which commenced in fiscal
2008.
Additionally,
management of the Company uses non-GAAP measures when viewing the results of
NJRES to monitor the operational results without the impact of unsettled and
certain settled derivative instruments. These non-GAAP measures are "financial
margin" and "net financial earnings."
Financial
margin represents Operating revenues from the sale of natural gas less Gas
purchases, and excludes the accounting impacts of unrealized gains and losses
from derivative instruments and realized gains and losses of certain derivative
instruments related to natural gas inventory. These accounting impacts represent
the change in fair value of these financial instruments, which represent futures
and swaps designed to economically hedge forecasted natural gas purchases, sales
and transportation, and are primarily open positions resulting in unrealized
gains or losses and settled derivative positions related to natural gas that is
still included in inventory storage. These settled instruments represent
realized gains and losses under GAAP, but result in economically hedging the
ultimate sale of natural gas. In addition, all of NJRES' physical commodity
contracts entered into after September 30, 2007 are being accounted for as
derivatives, with the change in fair value recorded as an unrealized gain or
loss under GAAP. Net financial earnings represent Net income excluding the
accounting impacts of unrealized and realized gains and losses from these
derivative instruments, after taxes.
As
revenues from the sale of natural gas to its customers, on a wholesale basis,
are highly correlated to the wholesale price of natural gas and the economic
impact of its derivative instruments will be substantially the same as the
accounting results under GAAP upon transaction settlement, management of the
Company believes that the net financial margin and net financial earnings
measurements represent the economic results of operations of NJRES. While
significant volatility is measured on a GAAP basis the ultimate impact of the
transaction will yield the same cash flow and economic result upon settlement of
the derivative instrument and completion of the forecasted transaction. In
viewing the financial margin and net financial earnings of NJRES, management of
the Company reviews the results of operations without this volatility to measure
the economic impact that NJRES achieved in relation to established
benchmarks and goals.
The
following table is a computation of Financial margin of NJRES:
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
Operating
      revenues
$
520,211
$
495,787
Gas
      purchases
494,546
470,942
Add:
Unrealized
      loss (gain) on derivative instruments
4,922
(8,039
)
Realized
      loss from derivative instruments related to natural gas
      inventory
5,163
1,289
Financial
      margin
$
35,750
$
18,095
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
A
reconciliation of Operating income, the closest GAAP financial
measurement, to the Financial margin of NJRES is as
follows:
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
Operating
      income
$
22,563
$
21,596
Add:
Operation
      and maintenance expense
2,840
3,003
Depreciation
      and amortization
53
54
Other
      taxes
209
192
Subtotal
      – Gross margin
$
25,665
$
24,845
Add:
Unrealized
      loss (gain) on derivative instruments
4,922
(8,039
)
Realized
      loss from derivative instruments related to natural gas
      inventory
5,163
1,289
Financial
      margin
$
35,750
$
18,095
A
reconciliation of Net income to Net financial earnings is as
follows:
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
Net
      income (loss)
$
13,150
$
11,524
Add:
Unrealized
      loss (gain) on derivative instruments, net of taxes
2,900
(4,464
)
Realized
      loss from derivative instruments related to natural gas
      inventory,
net
      of taxes
3,042
759
Net
      financial earnings
$
19,092
$
7,819
NJRES'
financial margin for the three months ended December 31, 2007 increased $17.7
million, compared with the same period in prior fiscal year, due primarily to
increased availability of capacity assets in the Northeast market region. The
additional capacity enabled NJRES to transport higher volumes of natural gas to
the Northeast region during the current winter season, when these capacity
assets have a greater market value and correspondingly higher locational spread,
than in the summer season when demand for natural gas is typically lower. The
increase in financial margin was also partially attributable to colder weather
in the Northeast and Mid-Continent regions of the U.S., when compared to the
same period in the prior fiscal year, which resulted in higher demand levels for
natural gas, and enabled NJRES to actively participate in the supply of natural
gas to those regions through transaction activities that optimized the value of
the existing portfolio of physical assets.
NJRES'
operation and maintenance expense decreased $163,000, during the three months
ended December 31, 2007, compared with the same period last fiscal year, due
primarily to timing of adjustments related to performance incentives, partially
offset by additional shared corporate service costs.
Future
results are subject to NJRES' ability to maintain and expand its wholesale
marketing activities and are contingent upon many other factors, including an
adequate number of appropriate counterparties, volatility in the natural gas
market, sufficient liquidity in the energy trading market and continued access
to the capital markets.
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Retail and Other
Operations
The
consolidated financial results of Retail and Other are summarized as
follows:
Three Months
      Ended
December
    31,
(Thousands)
2007
2006
Operating
      revenues
$
6,631
$
2,276
Operation
      and maintenance expense
$
5,460
$
5,058
Other
      income
$
166
$
114
Equity
      in earnings, net of tax
$
424
$
417
Net
      income (loss)
$
365
$
(1,998
)
NJR
Energy has an economic hedge associated with a long-term fixed-price contract to
sell gas to a counterparty. Unrealized losses or gains at NJR Energy are the
result of the change in value associated with derivative financial instruments
(futures contracts) designed to economically hedge the long-term fixed-price
contract.
The
results of operations include unrealized (losses) associated with these
derivative instruments of $(305,000) and $(4.1) million for the three months
ended December 31, 2007 and 2006, respectively, which are recorded, pre-tax, as
a component of Operating revenues. On an after-tax basis, these unrealized
(losses) are $(180,000) and $(2.4) million for the three months ended December
31, 2007 and 2006, respectively.
Operating
revenue for the three months ended December 31, 2007 increased $4.4 million due
primarily to lower unrealized losses at NJR Energy, which are the result of a
combination of the partial settlement of these futures contracts, partially
offset by an increase in value of the futures contracts in relation to changing
market conditions.
Operation
and maintenance expenses for the three months ended December 31, 2007 increased
$402,000 due to higher compensation costs due primarily to an increase in the
number of employees as well as annual wage increases.
Other
income for the three months ended December 31, 2007 remained consistent as
compared to the same period in fiscal 2007.
Taxes
netted in Equity in earnings from Iroquois are $282,000 and $276,000 and are
included in the Condensed Consolidated Statements of Income for the three months
ended December 31, 2007 and 2006, respectively. Equity in earnings from Iroquois
is driven by the underlying performance of natural gas transportation through
its existing pipeline, which is based on FERC regulated tariffs.
Net
income for the three months ended December 31, 2007 increased $2.4 million
compared to the same period in fiscal 2007 due primarily the reasons noted
above.
Liquidity and Capital
Resources
NJR's
objective is to maintain a consolidated capital structure that reflects the
different characteristics of each business segment and provides adequate
financial flexibility for accessing capital markets as required.
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
NJR's
consolidated capital structure was as follows:
December 31,
September
      30,
2007
2007
Common
      stock equity
49
%
50
%
Long-term
      debt
27
30
Short-term
      debt
24
20
Total
100
%
100
%
Common stock
equity
NJR
satisfies its external common equity requirements, if any, through issuances of
its common stock, including the proceeds from stock issuances under its
Automatic Dividend Reinvestment Plan (DRP) and proceeds from the exercise of
options issued under the Company's long-term incentive program. The DRP allows
NJR, at its option, to use shares purchased on the open market or newly issued
shares.
As
of December 31, 2007, the Company had a 4.5 million share repurchase plan that
has been approved by its Board of Directors and has repurchased approximately
3.5 million shares under this plan.
Debt
NJR
and its unregulated subsidiaries rely on cash flows generated from operating
activities and utilization of committed credit facilities to provide liquidity
to meet working capital and external debt-financing requirements.
As
of December 31, 2007, NJR, NJRES and NJNG had committed credit facilities of
$605 million with approximately $289 million available under these facilities
(see
Note 6.
Debt).
NJR
believes that as of December 31, 2007, NJR, NJNG and NJRES were, and currently
are, in compliance with all debt covenants.
NJR
believes that existing borrowing availability, its current cash balances and its
cash flow from operations will be sufficient to satisfy it and its subsidiaries'
working capital, capital expenditure and dividend requirements for the
foreseeable future. NJR, NJNG and NJRES currently anticipate that its financing
requirements in fiscal 2008 and 2009 will be met through the issuance of
short-term and long-term debt and proceeds from the Company's Automatic Dividend
Reinvestment Plan. The proposed issuance of up to $125 million of medium-term
debt to satisfy a portion of NJNG's financing requirements is pending BPU review
and approval.
NJR
On
December 13, 2007, NJR refinanced its prior senior credit facility for a new
$325 million, five-year, revolving, unsecured credit facility. The new credit
facility permits the borrowing of amounts under a revolving basis, as well as
the issuance of letters of credit. It also permits an increase to the facility,
from time to time, with the existing or new lenders, in a minimum of $5 million
increments up to a maximum $100 million. The new credit facility refinances an
earlier credit facility that provided for $325 million in revolving credit that
was scheduled to expire on December 16, 2007. NJR used the initial borrowings
under the new credit facility to refinance its prior credit facility and pay all
related fees and expenses. The new credit facility permits the borrowing of
revolving loans and swingline loans, as well as the issuance of letters of
credit. In addition, NJR's subsidiaries have guaranteed to the lenders all of
NJR's obligations under the new credit facility.
37
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Depending
on borrowing levels and credit ratings, NJR's interest rate can either be, at
its discretion, the London inter-bank offered rate ("LIBOR") or the Federal
Funds Open Rate plus an applicable spread and facility fee. As of
December
31, 2007, NJR's effective rate was 5.18 percent on outstanding
borrowings of $92.6 million under this credit facility.
In
addition, borrowings under NJR's new credit facility are conditioned upon
compliance with a maximum leverage ratio, as defined in the new credit facility,
of not more than 0.65 to 1.00 at any time.
NJR
uses its short term borrowings primarily to finance its share repurchases, to
satisfy NJRES' short term liquidity needs and to finance, on an initial basis,
unregulated investments. NJRES' use of high-injection, high-withdrawal storage
facilities and anticipated pipeline park-and-loan arrangements, combined with
related economic hedging activities in the volatile wholesale natural gas
market, create significant short-term cash requirements.
NJNG
NJNG
satisfies its debt needs by issuing short- and long-term debt based upon its own
financial profile. The seasonal nature of NJNG's operations creates large
short-term cash requirements, primarily to finance natural gas purchases and
customer accounts receivable. NJNG obtains working capital for these
requirements, and for the temporary financing of construction and MGP
remediation expenditures and energy tax payments, through the issuance of
commercial paper and short-term bank loans.
To
support the issuance of commercial paper, NJNG has a $250 million committed
credit facility with several banks, with a 5-year term, expiring in December
2009. NJNG had $109.1 million of commercial paper borrowings supported by the
credit facility as of December 31, 2007, and $175.7 million of commercial paper
borrowings as of September 30, 2007.
NJNG
has a 3-year, $30 million uncommitted credit facility with a multinational
financial institution. As of December 31, 2007, NJNG had borrowings of $6.3
million outstanding under this facility. Borrowings under this facility are in
addition to the amount available under the NJNG bank credit facility mentioned
above.
Neither
NJNG nor its assets are obligated or pledged to support the NJR or NJRES
facilities.
NJRES
NJRES
has a 3-year $30 million committed credit facility with a multinational
financial institution. Borrowings under this facility are guaranteed by NJR.
There were no borrowings under this facility as of December 31,
2007.
38
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Part
I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Contractual
Obligations
The
following table is a summary of NJR, NJNG and NJRES contractual cash obligations
and financial commitments and their applicable payment due dates as of December
31, 2007.
(Thousands)
Payments Due by Period
Contractual Obligations
Total
Up to
1 Year
2-3
Years
4-5
Years
After
5 Years
Long-term
      debt
(1)
$522,886
$45,754
$71,349
$23,748
$382,035
Capital
      lease obligations
(1)
91,418
8,813
17,821
19,899
44,885
Operating
      leases
10,933
3,027
4,021
1,707
2,178
Short-term
      debt
(1)
304,026
304,026
—
—
—
New
      Jersey Clean Energy Program
(1)
10,945
10,945
—
—
—
Construction
      obligations
3,938
3,938
—
—
—
Remediation
      expenditures
(2)
105,340
19,000
17,900
10,200
58,240
Natural
      gas supply purchase obligations–NJNG
91,093
71,359
19,734
—
—
Demand
      fee commitments - NJNG
601,752
85,737
204,600
169,595
141,820
Natural
      gas supply purchase obligations–NJRES
866,577
537,302
329,275
—
—
Demand
      fee commitments - NJRES
218,026
92,001
81,764
33,104
11,157
Total
      contractual cash obligations
$2,826,934
$1,181,902
$746,464
$258,253
$640,315
(1)  These
obligations include an interest component, as defined under the governing
agreements.
(2)  Expenditures
are estimated.
In
fiscal 2008, the Company has no minimum pension funding requirements. The
Company's funding to its OPEB plans is expected to be approximately $1.5 million
in fiscal 2008 and $1.1 million annually, over the next four years. Additional
contributions may be made based on market conditions and various
assumptions.
As
of December 31, 2007, there were NJR guarantees covering approximately $352
million of natural gas purchases and demand fee commitments of NJRES and NJNG,
included in natural gas supply purchase obligations above, not yet reflected in
Accounts payable on the Condensed Consolidated Balance Sheet.
The
Company is obligated to fund up to $125 million associated with the construction
and development of Steckman Ridge. Currently, NJR anticipates that Steckman
Ridge will secure non-recourse project financing for a portion of its
construction activities and therefore potentially reduce NJR's obligation. There
can be no assurances that Steckman Ridge will eventually secure such
non-recourse project financing.
Total
capital expenditures for fiscal 2008 are estimated at $78.6 million, including
expenditures of $13.5 million incurred during the three months ended December
31, 2007.
Off-Balance-Sheet
Arrangements
The
Company does not have any off-balance-sheet financing arrangements.
Cash Flow
Operating
Activities
As
presented in the Condensed Consolidated Statements of Cash Flows, cash flow used
in operations totaled $6.5 million for the three months ended December 31, 2007,
compared with cash flow from operations of $12.4 million for the same period in
fiscal 2007. Operating cash flows were primarily impacted by variations in
working capital, which are a function of the seasonality of NJR's business and
fluctuations in wholesale natural gas prices.
39
Table of Contents
New Jersey Resources
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Changes
in working capital more than offset higher net income and deferred income taxes
during the first quarter of fiscal 2008. The components of working capital that
contributed to the decrease in operating cash flows for the three months ended
December 31, 2007 as compared to the same period in fiscal 2007 are as
follows:
Ÿ
At
      NJNG, an increase in billed and unbilled accounts receivable of $48.9
      million as a result of colder weather and lower customer credits in fiscal
      2008 as compared to fiscal 2007; partially offset by
Ÿ
A
      decrease in inventory at NJNG as a result of increased usage during the
      heating season; and
Ÿ
A
      decrease in the change in gas purchases payable primarily at NJRES as a
      result of lower gas storage balances, partially offset by increased
      natural gas commodity prices.
NJNG's
MGP expenditures are currently expected to total $19.1 million in fiscal 2008
(see
Note 12. Commitments and
Contingent Liabilities).
Financing
Activities
Cash
flow from financing activities totaled $23.1 million for the three months ended
December 31, 2007, compared with cash flows from financing activities of $5.3
million for the same period in the prior fiscal year. The change was due
primarily to an increase in short-term borrowings, which typically increase
during the winter and was impacted during the first quarter of fiscal 2008 by
the increased demand of natural gas as a result of the colder weather as
compared with the same period in fiscal 2007, offset by cash payments for
treasury stock of $10.1 million of which $7.7 million is for settled purchases
from the fourth quarter of fiscal 2007.
NJNG
received $7.5 million in the three months ended December 31, 2007, in connection
with the sale-leaseback of its gas meters. This sale-leaseback program will
continue on an annual basis.
Investing
Activities
Cash
flows used in investing activities totaled $17.9 million for the three months
ended December 31, 2007, compared with $12.5 million in the same period in
fiscal 2007. The increase was due primarily to an additional equity investment
in Steckman Ridge and increased capital expenditures for utility plant offset by
cash received from the sale of land at CR&R in the first quarter of fiscal
2007 that did not recur in fiscal 2008.
Retail
and Other capital expenditures each year have been made primarily in connection
with investments made to preserve the value of real estate holdings. At December
31, 2007, CR&R owned 83 acres of undeveloped land and a 56,400-square-foot
building on 5 acres of land.
NJR
is obligated to finance 50 percent of the acquisition and development costs of
the Steckman Ridge storage facility, up to a maximum of $125 million, of which
$58 million was expended through December 31, 2007.
NJR's
investment in Steckman Ridge is a strategic investment to enter the mid-stream
natural gas business. This storage capacity will provide NJR the potential to
diversify is revenue stream through another market-based outlet that has a
consistent demand and a regulated tariff structure. NJR anticipates a portion of
Steckman Ridge to be financed on a non-recourse, or project, basis and for the
majority of its revenue to be secured by long-term contracts; however, there can
be no assurances that this will occur.
NJRES
does not currently anticipate any significant capital expenditures in fiscal
2008.
40
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I
ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
Credit Ratings
The
table below summarizes NJNG's credit ratings issued by two rating entities,
Standard and Poor's (S&P) and Moody's Investors Service, Inc. (Moody's)
as of December 31, 2007:
Standard and
      Poor's
Moody's
Corporate Rating
A+
N/A
Commercial
      Paper
A-1
P-1
Senior
      Secured
AA-
Aa3
Ratings
      Outlook
Negative
Stable
NJNG's
S&P and Moody's Senior Secured ratings are investment-grade ratings and
represent the sixth highest rating within the investment grade category. Moody's
and S&P give NJNG's commercial paper the highest rating within the
Commercial Paper investment-grade category.
Investment-grade
ratings are generally divided into three groups: high, upper medium and medium.
NJNG's senior secured ratings and the commercial paper ratings fall into the
high group. NJR is not a rated entity.
NJNG
is not party to any lending agreements that would accelerate the maturity date
of any obligation caused by a failure to maintain any specific credit rating. A
rating set forth above is not a recommendation to buy, sell or hold the
Company's or NJNG's securities and may be subject to revision or withdrawal at
any time. Each rating set forth above should be evaluated independently of any
other rating.
The
timing and mix of any external financings will target a common equity ratio that
is consistent with maintaining the Company's current short- and long-term credit
ratings.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
Financial Risk
Management
Commodity Market
Risks
Natural
gas is a nationally traded commodity, and its prices are determined effectively
by the New York Mercantile Exchange (NYMEX) and over-the-counter markets.
The prices on the NYMEX and over-the-counter markets generally reflect the
notional balance of natural gas supply and demand, but are also influenced
significantly from time to time by other events.
The
regulated and unregulated natural gas businesses of the Company and its
subsidiaries are subject to market risk due to fluctuations, in the price of
natural gas. To economically hedge against such fluctuations, the Company and
its subsidiaries have entered into futures contracts, options agreements and
swap agreements. To manage these derivative instruments, the Company has
well-defined risk management policies and procedures that include daily
monitoring of volumetric limits and monetary guidelines. The Company's natural
gas businesses are conducted through three of its operating subsidiaries. First,
NJNG is a regulated utility that uses futures, options and swaps to economically
hedge against price fluctuations and its recovery of natural gas costs is
governed by the BPU. Second, NJRES uses futures, options and swaps to
economically hedge purchases and sales of natural gas. Finally, NJR Energy has
entered into two swap transactions related to an 18-year fixed-price contract,
expiring in October 2010 to sell remaining volumes of approximately 6.7 Bcf of
natural gas (Gas Sales Contract) to an energy marketing
company.
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New Jersey Resources
Corporation
Part
I
ITEM 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
The
following table reflects the changes in the fair market value of financial
derivatives related to natural gas purchases and sales from December 31,
2007:
(Thousands)
Balance
September
      30,
2007
Increase
(Decrease) in
      Fair
Market Value
Less
Amounts
Settled
Balance
December
31,
2007
NJNG
$(51,861
)
$(1,942
)
$(8,449
)
$(45,354
)
NJRES
89,446
(2,049
)
7,820
79,577
NJR
      Energy
28,353
623
928
28,048
Total
$
      65,938
$(3,368
)
$    299
$
      62,271
There
were no changes in methods of valuations during the year ended December 31,
2007.
The
following is a summary of fair market value of financial derivatives related to
natural gas purchases and sales at December 31, 2007, by method of valuation and
by maturity for each fiscal year period:
(Thousands)
2008
2009
2010-2012
After
2012
Total
Fair Value
Price
      based on NYMEX
$51,045
$6,436
$(3,691
)
—
$53,790
Price
      based on other external data
5,908
1,865
708
—
8,481
Total
$56,953
$8,301
$(2,983
)
—
$62,271
The
following is a summary of financial derivatives by type as of December 31,
2007:
Volume
(Bcf)
Price per
Mmbtu
Amounts
      included
in Derivatives
(Thousands)
NJNG
Futures
3.4
$6.93
      - $  8.80
$   5,726
Swaps
2.5
$4.19
      - $  9.70
(49,410
)
Options
6.6
$7.25
      - $11.00
(1,670
)
NJRES
Futures
(6.6
)
$6.94
      - $11.59
4,880
Swaps
(93.6
)
$6.74
      - $13.03
72,372
Options
0.6
$6.75
      - $11.25
2,325
NJR
      Energy
Swaps
7.2
$3.22
      - $  4.41
28,048
Total
$62,271
The
following table reflects the changes in the fair market value of physical
commodity contracts from December 31, 2007:
(Thousands)
Balance
September
      30,
2007
Increase
(Decrease) in
      Fair
Market Value
Less
Amounts
Settled
Balance
December
31,
2007
NJRES
—
$5,615
$3,571
$
      2,044
The
Company uses a value-at-risk (VaR) model to assess the market risk of its net
futures, options and swap positions. VaR represents the potential loss in value
of NJRES' trading portfolio due to adverse market movements over a defined time
horizon (NJRES utilizes holding periods of 1 day and 10 days) with a specified
confidence level (NJRES utilizes either a 95 percent or 99 percent confidence
level). As an example, utilizing a 1 day holding period with a 95 percent
confidence level would indicate that there is a 5 percent chance that the
liquidation value of the NJRES portfolio would fall below the expected trading
value by an amount at least as large as the calculated VaR.
42
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New Jersey Resources
Corporation
Part
I
ITEM 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
The
VaR at December 31, 2007, using the variance-covariance method with a 95 percent
confidence level and a 1-day holding period, was $500,000. The VaR with a 99
percent confidence level and a 10-day holding period was $2.3 million. The
calculated VaR represents an estimate of the potential change in the value of
the net positions. These estimates may not be indicative of actual results
because actual market fluctuations may differ from forecasted
fluctuations.
Wholesale Credit
Risk
NJNG,
NJRES and NJR Energy engage in wholesale marketing activities. NJR monitors and
manages the credit risk of its wholesale marketing operations through credit
policies and procedures that management believes reduce overall credit risk.
These policies include a review and evaluation of prospective counterparties'
financial statements and/or credit ratings, daily monitoring of counterparties'
credit limits, daily communication with traders regarding credit status and the
use of credit mitigation measures, such as minimum margin requirements,
collateral requirements and netting agreements. Examples of collateral include
letters of credit and cash received for either prepayment or margin
deposit.
The
Company's Risk Management Committee (RMC) continuously monitors NJR's credit
risk management policies and procedures. The RMC is comprised of individuals
from NJR-affiliated companies that meet twice a month and, among other things,
evaluates the effectiveness of existing credit policies and procedures, reviews
material transactions and discusses emerging issues.
The
following is a summary of gross and net credit exposures, grouped by investment
and noninvestment grade counterparties, as of December 31, 2007. Gross credit
exposure is defined as the unrealized fair value of derivative and energy
trading contracts plus any outstanding receivable for the value of natural gas
delivered for which payment has not yet been received. Net credit exposure is
defined as gross credit exposure reduced by collateral received from
counterparties and/or payables, where netting agreements exist. The amounts
presented below exclude accounts receivable for retail natural gas sales and
services.
Unregulated
counterparty credit exposure as December 31, 2007, is as follows:
(Thousands)
Gross Credit
Exposure
Net Credit
Exposure
Investment
      grade
$
294,237
$
204,835
Noninvestment
      grade
1,368
—
Internally
      rated investment grade
19,626
12,323
Internally
      rated noninvestment grade
3,617
—
Total
$
318,848
$
217,158
NJNG's
counterparty credit exposure as of December 31, 2007, is as
follows:
(Thousands)
Gross Credit
Exposure
Net Credit
Exposure
Investment
      grade
$
31,331
$
18,556
Noninvestment
      grade
567
4
Internally
      rated investment grade
3,962
3,403
Internally
      rated noninvestment grade
57
—
Total
$
35,917
$
21,963
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New Jersey Resources
Corporation
Part
I
ITEM 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
Due
to the inherent volatility in the prices of natural gas commodities and
derivatives, the market value of contractual positions with individual
counterparties could exceed established credit limits or collateral provided by
those counterparties. If a counterparty failed to perform the obligations under
its contract (for example, failed to deliver or pay for natural gas), then the
Company could sustain a loss. This loss would comprise the loss on natural gas
delivered but not paid for and/or the cost of replacing natural gas not
delivered at a price higher than the price in the original contract. Any such
loss could have a material impact on the Company's financial condition, results
of operations or cash flows.
Interest Rate Risk–Long-Term
Debt
At
December 31, 2007, the Company (excluding NJNG) had no variable-rate long-term
debt.
At December
31, 2007, NJNG had total variable-rate, tax-exempt long-term debt of $97.0
million. To limit its exposure to variable rates the company purchased interest
rate caps. These caps have a strike price of 4.5 percent, expire in July
2009 and reference the USD-BMA Municipal Index.
Effects of
Inflation
Although
inflation rates have been relatively low to moderate in recent years, any change
in price levels has an effect on operating results due to the capital-intensive
and regulated nature of the Company's utility subsidiary. The Company attempts
to minimize the effects of inflation through cost control, productivity
improvements and regulatory actions where appropriate.
ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and
Procedures
Under
the supervision and with the participation of the Company's management,
including the principal executive officer and principal financial officer, the
Company conducted an evaluation of the effectiveness of the design and operation
of its disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e)) under the Exchange Act, as of the end of the period covered by this
report. Based on this evaluation, the Company's principal executive officer and
principal financial officer concluded that, as of end of the period covered by
this report, the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms, and that such information is accumulated and communicated to the
Company's management, including its principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
In
connection with the Company's preparation of its consolidated financial
statements for the fiscal year ended September 30, 2007, the Company reassessed
its accounting treatment and disclosures for its derivative instruments under
Statement of Financial Accounting Standards 133
Accounting for Derivative
Instruments and Hedging Activities
(as interpreted and amended, "SFAS
133"). As a result of this accounting assessment, the Company determined that
certain of its derivative instruments have not qualified as cash flow hedges
under SFAS 133 as they did not meet the definition for "critical-terms-match,"
as defined under paragraph 65 of SFAS 133 and related authoritative accounting
literature issued by various standard setting bodies and their related
interpretations for all fiscal periods. As the Company has determined the
hedging relationships did not meet the "critical-terms-match," the related
derivative instruments did not qualify as cash flow hedges and the unrealized
gains or losses on the derivative instruments are required to be reflected in
the Consolidated Statement of Income for each period rather than recorded in
Comprehensive Income and included as a component of "accumulated other
comprehensive
44
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New Jersey Resources
Corporation
Part
I
ITEM 4. CONTROLS AND PROCEDURES
      (Continued)
income,"
a component of Total Common Stock Equity in the Consolidated Balance Sheets,
until the forecasted transaction is settled. Therefore, because of this material
weakness, the Company amended and restated certain of its historical
consolidated financial statements and made appropriate changes in the
preparation of its consolidated financial statements for the year ended
September 30, 2007, including the Condensed Consolidated Statements of Income
and of Cash flows for the three months ended December 31, 2006.
The
Company continually reviews its disclosure controls and procedures and makes
changes, as necessary, to ensure the quality of its financial reporting. As
detailed below, the Company has implemented certain additional controls that it
believes will significantly reduce the potential for similar issues to arise in
the future.
Changes in Internal Control over
Financial Reporting
Management
and the Board of Directors are committed to the remediation of the material
weakness set forth above as well as the continued improvement of the Company's
overall system of internal control over financial reporting. Management is in
the process of actively addressing and remediating the material weakness in
internal control over financial reporting described above. During the quarter
ended December 31, 2007, in connection with the material weakness in internal
control over financial reporting detailed above, the Company implemented or is
in the process of implementing the following controls designed to substantially
reduce the risk of a similar material weakness occurring in the
future:
Ÿ
improving
      training, education and accounting reviews for all relevant personnel
      involved in the accounting treatment and disclosures for the Company's
      derivative instruments to ensure compliance with generally accepted
      accounting principles, including SFAS 133 and its related
      interpretations;
Ÿ
ensuring
      the Company has the accounting technical expertise requirements necessary
      for compliance with SFAS 133;
Ÿ
initiating
      a thorough review of the design of the internal control over financial
      reporting related to the accounting of derivative instruments, which will
      incorporate an analysis of the current staffing levels, job assignments
      and the design of all internal control processes for the accounting for
      derivative instruments and implement new and improved processes and
      controls, if warranted; and
Ÿ
increasing
      the level of review and discussion of significant accounting matters and
      supporting documentation with senior finance
  management.
In
addition, as part of the Company's fiscal 2008 assessment of internal control
over financial reporting, management will conduct sufficient testing and
evaluation of the controls to be implemented as part of this remediation plan to
ascertain that they operate effectively. The Company anticipates that these
remediation actions represent ongoing improvement measures. While the Company
has taken steps to remediate the material weakness, these steps may not be
adequate to fully remediate the material weakness, and additional measures may
be required. The effectiveness of its remediation efforts will not be known
until the Company can test those controls in connection with the management
tests of internal control over financial reporting that the Company will perform
as of September 30, 2008. The Company believes, however, these measures will
fully remediate the above identified material weakness in its internal control
over financial reporting.
These
were the only changes in the Company's internal control over financial reporting
(as such term is defined in Exchange Act Rule 13a-15(f)) that occurred during
the quarter ended December 31, 2007, that have materially affected, or are
reasonably likely to materially affect, internal control over financial
reporting.
45
Table of Contents
New Jersey Resources
Corporation
Part
II
ITEM 1.
LEGAL
PR
OCEEDINGS
Information
regarding reportable legal proceedings is contained in Part I, "Item 3. Legal
Proceedings" in NJR's Annual Report on Form 10-K for the year ended September
30, 2007, and is set forth in Part I, Item 1, Note 12,
Commitment and Contingent
Liabilities—Legal Proceedings
. No legal proceedings became reportable
during the quarter ended December 31, 2007 and there have been no material
developments during such quarter regarding any previously reported legal
proceedings, which have not been previously disclosed.
ITEM 1A
. RISK
      FACTORS
Part
I, Item 1A, "Risk Factors," of NJR's 2007 Annual Report on Form 10-K includes a
detailed discussion of NJR's risk factors. There have been no changes to those
risk factors during the quarter ended December 31, 2007.
ITEM 2.
UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
      PROCEEDS
In
1996, the NJR Board of Directors authorized the repurchase of up to 1 million of
the Company's common shares. Since 1996, the repurchase plan has been expanded
several times. On November 14, 2007, the NJR Board of Directors authorized an
increase to the plan to permit the repurchase, in the open market or in
privately negotiated transactions, of 1 million shares, bringing the total
permitted repurchases to 4.5 million shares as of that date. As of December 31,
2007, the Company has 960,747 shares of its common stock still available for
repurchase.
The
following table sets forth NJR's repurchase activity for the quarter ended
December 31, 2007:
Period
Total Number of
      Shares
(or Units)
Purchased
Average Price Paid
per Share
(or
      Unit)
Total Number of Shares (or
      Units)
Purchased as Part of Publicly
Announced Plans or
      Programs
Maximum Number (or Approximate
      Dollar Value) of Shares (or Units) That May Yet be Purchased Under the
      Plans or Programs
10/1/07
      – 10/31/07
—
—
—
8,147
11/1/07
      – 11/30/07
—
—
—
1,008,147
(1)
12/1/07
      – 12/31/07
47,400
50.082
—
960,747
Total
47,400
50.082
—
960,747
(1)  Includes 1 million
additional common shares approved to be repurchased by NJR Board of
Directors.
46
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New Jersey Resources
Corporation
Part
II
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a)
An
      annual meeting of shareholders was held on January 23,
      2008.
(b)
The
      shareholders voted upon the following matters at the January 23, 2008
      annual shareholders meeting:
(i)
The
      election of three directors to the Board of Directors for terms expiring
      in 2011. The results of the voting were as
  follows:
DIRECTORS UNTIL
      2011
FOR
WITHHELD
Nina
      Aversano
21,771,028
1,290,463
Jane
      M. Kenny
22,661,663
399,829
David
      A. Trice
21,674,820
1,386,671
In
addition to the directors elected at the annual meeting, the terms of the
following members of NJR's Board of Directors continued after the
meeting:
(ii)
Approval
      of the action of the Audit Committee in retaining Deloitte & Touche
      LLP as NJR's independent registered public accounting firm. The results of
      the voting were as follows:
FOR
AGAINST
ABSTAIN
22,770,312
223,844
67,335
In
addition to the directors elected at the annual meeting, the terms of the
following members of NJR's Board of Directors continued after the
meeting:
Lawrence
      R. Codey
Laurence
      M. Downes
M.
      William Howard
Alfred
      C. Koeppe
J.
      Terry Strange
William
      H. Turner
George
      R. Zoffinger
There
were no broker non-votes in either of the matters voted upon by our
shareholders.
47
Table of Contents
New Jersey Resources
Corporation
Part
II
ITEM 6
.
      EXHIBITS
4.9
$325
      million Revolving Credit Facility Credit Agreement by and among the
      Company, PNC Bank, N.A. as Administrative Agent, the banks party thereto,
      JPMorgan Chase Bank, N.A. and Bank of America, N.A., as Syndication
      Agents, Citibank, N.A. and The Bank of Nova Scotia, as Documentation
      Agents and PNC Capital Markets, LLC, as Lead Arranger, dated as of
      December 13, 2007.
31.1
Certification
      of the Chief Executive Officer pursuant to section 302 of the
      Sarbanes-Oxley Act
31.2
Certification
      of the Chief Financial Officer pursuant to section 302 of the
      Sarbanes-Oxley Act
32.1
Certification
      of the Chief Executive Officer pursuant to section 906 of the
      Sarbanes-Oxley Act*
32.2
Certification
      of the Chief Financial Officer pursuant to section 906 of the
      Sarbanes-Oxley Act*
*This
certificate accompanies this report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by NJR for purposes of
Section 18 or any other provision of the Securities Exchange Act of 1934, as
amended.
48
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SIG
NATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
NEW
      JERSEY RESOURCES CORPORATION
(Registrant)
Date:
      February 6, 2008
By:/s/
      Glenn C. Lockwood
Glenn
      C. Lockwood
Senior
      Vice President and
Chief
      Financial Officer
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated:
49
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