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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">UNITED
STATES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">SECURITIES
AND EXCHANGE COMMISSION</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">Washington,
D.C. 20549</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">FORM
10-Q</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2008</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">OR</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><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">SECURITIES
EXCHANGE ACT OF 1934</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">Commission
file number 1-8359</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">NEW
JERSEY RESOURCES CORPORATION</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">(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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">New
      Jersey</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">22-2376465</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">(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">incorporation
      or organization)</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">(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">Identification
      Number)</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1415
      Wyckoff Road, Wall, New Jersey 07719</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">732-938-1480</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">(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">executive
      offices)</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">(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">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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Common
      Stock - $2.50 Par Value</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">New
      York Stock Exchange</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">(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">(Name
      of each exchange on which
registered)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">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></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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, a non-accelerated, or a smaller reporting company. See
definition of &#8220;large accelerated filer&#8221;, &#8220;accelerated filer&#8221; and &#8220;smaller
reporting company&#8221; in Rule&#160;12b-2 of the Exchange Act. (Check
one):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">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>&#160;&#160;&#160;&#160;&#160;Smaller
reporting company:&#160;<font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="82%">
              <div style="DISPLAY: block; MARGIN-LEFT: 232pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Do
      not check if a smaller</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 232pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">reporting
      company)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">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></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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 August 1,
2008 <font style="DISPLAY: inline; FONT-SIZE: 8pt">was 42,034,445.&#160;
</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>&#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-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Times New Roman, Times New Roman, serif"><a name="toc">TAB</a>LE OF CONTENTS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <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="80%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Page</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"><a href="#fwd">Information Concerning Forward-Looking
      Statements&#160;&#160;&#160;&#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;&#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="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">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="6%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#fininfo">PART&#160;I &#8211; FINANCIAL INFORMATION</a></font></div>
              </td>
              <td valign="top" width="6%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#fins">ITEM 1.</a></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"><a href="#fins">Unaudited Financial
      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;</font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">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="59%">
                <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"><a href="#notes">Notes to Unaudited Condensed Consolidated Financial
      Statements</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#gen">Note 1&#160;&#160;&#160;&#160;General</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#reg">Note 2&#160;&#160;&#160;&#160;Regulation</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#n3">Note 3&#160;&#160;&#160;&#160;Derivative
      Instruments</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">12</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#n4">Note 4&#160;&#160;&#160;&#160;Investments In Equity
      Investees</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">13</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#n5">Note 5&#160;&#160;&#160;&#160;Earnings Per
      Share</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">14</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#deb">Note 6&#160;&#160;&#160;&#160;Debt</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">14</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><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="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">16</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#stk">Note 8&#160;&#160;&#160;&#160;Stock-Based
      Compensation</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">17</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#emp">Note 9&#160;&#160;&#160;&#160;Employee Benefit
      Plans</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">17</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#aro">Note 10&#160;&#160;Asset Retirement
      Obligations</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">18</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#adop">Note 11&#160;&#160;Adoption Of Fin 48 and Income
      Taxes</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">18</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#comm">Note 12&#160;&#160;Commitments And Contingent
      Liabilities</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">19</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#bus">Note 13&#160;&#160;Business Segment Data</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">21</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="3" valign="top" width="17%"><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"><a href="#oth">Note 14&#160;&#160;Other</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">22</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#mda">ITEM 2.</a></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"><a href="#mda">Management&#8217;s Discussion and Analysis of Financial Condition
      and Results of&#160;Operations for the Three and Nine Months Ended June
      30, 2008</a></font></div>
              </td>
              <td align="right" valign="bottom" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">22</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#qq">ITEM 3.</a></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"><a href="#qq">Quantitative and Qualitative Disclosures About Market
      Risk&#160;&#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;</font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#contr">ITEM 4.</a></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"><a href="#contr">Controls and
      Procedures&#160;&#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;</font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">50</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="6%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#p2">PART&#160;II &#8211; OTHER INFORMATION</a></font></div>
              </td>
              <td valign="top" width="6%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#legl">ITEM 1.</a></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"><a href="#legl">Legal
      Proceedings&#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;</font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">53</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#rsk">ITEM 1A.</a></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"><a href="#rsk">Risk
      Factors&#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="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">53</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#unreg">ITEM 2.</a></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"><a href="#unreg">Unregistered Sale of Equity Securities and Use of
      Proceeds&#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="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">53</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#othin">ITEM 5.</a></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"><a href="#othin">Other Information</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">54</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="#exh">ITEM 6.</a></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"><a href="#exh">Exhibits</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">54</font></div>
              </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: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="exh31-1.htm">Certification 31.1</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">54</font></div>
              </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: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="ex31-2.htm">Certification 31.2</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">54</font></div>
              </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: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="exh32-1.htm">Certification 32.1</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">54</font></div>
              </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: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a href="exh32-2.htm">Certification 32.2</a></font></div>
              </td>
              <td align="right" valign="top" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">54</font></div>
              </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%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<a href="expressrelease.htm">Press Release dated August 5, 2008</a></font></td>
              <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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"><a href="#sig">Signatures</a></font></div>
              </td>
              <td align="right" valign="bottom" width="6%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0.45pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">55</font></div>
              </td>
            </tr>
        </table>
      </div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    </div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div style="WIDTH: 100%" align="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">i</font></div>
          </div>
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
</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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="fwd">INF</a>ORMATION CONCERNING FORWARD-LOOKING
STATEMENTS</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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 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&#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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; FONT-FAMILY: times new roman, times new roman, serif">increases
      in borrowing costs associated with variable-rate debt;</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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td 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: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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: 10pt; FONT-FAMILY: wingdings">&#376;</font></div>
            </td>
            <td valign="top" width="75%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.5pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="fininfo">ITEM 1</a>. FINANCIAL
STATEMENTS</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="fins">UN</a>AUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="top" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -5.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="39%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands,&#160;except&#160;per&#160;share&#160;data)</font></div>
            </td>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="3" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -5.7pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="3" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="39%"><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 colspan="3" valign="top" width="10%">
              <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">As
      Restated</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">(See
      Note 1)</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="3" valign="bottom" width="10%">
              <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">As
      Restated</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">(See
      Note 1)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="39%"><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="8%"><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="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 valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">OPERATING
      REVENUES</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$1,000,439</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="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">$662,218</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,989,122</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">$2,428,662</font></div>
            </td>
            <td align="right" 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="39%"><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="8%"><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="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 valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">OPERATING
      EXPENSES</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="8%"><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="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 valign="top" width="39%">
              <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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">945,629</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">554,917</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,696,248</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">2,099,898</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 valign="top" width="39%">
              <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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">34,187</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">33,969</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">100,971</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">94,622</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="39%">
              <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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5,925</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">6,226</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">35,879</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">33,827</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 valign="top" width="39%">
              <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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9,680</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">9,080</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">28,600</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">26,968</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="39%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10,711</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="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">11,478</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">58,245</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="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">55,698</font></div>
            </td>
            <td align="right" 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="39%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,006,132</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="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">615,670</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,919,943</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="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">2,311,013</font></div>
            </td>
            <td align="right" 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 valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">OPERATING
      (LOSS) 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(5,693</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </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">46,548</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">69,179</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">117,649</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 valign="top" width="39%">
              <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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">237</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="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">1,081</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,305</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">3,232</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="39%" 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">Interest
      expense, 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5,182</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="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">5,387</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">19,684</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">20,353</font></div>
            </td>
            <td align="right" 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="left" valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">INCOME
      BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(10,638</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">42,242</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">52,800</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">100,528</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="39%">
              <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">Income
      tax provision</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(2,663</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </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">17,272</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">19,225</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">39,058</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 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Equity
      in earnings of affiliates, net of tax</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">378</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="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">407</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,548</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">1,302</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 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="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NET
      (LOSS) INCOME</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;(7,597</font></div>
            </td>
            <td align="left" valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></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">$&#160;&#160;25,377</font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;35,123</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">$&#160;&#160;&#160;&#160;&#160;62,772</font></div>
            </td>
            <td align="right" 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="39%"><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="8%"><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="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 valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(LOSS)
      EARNINGS PER COMMON SHARE*</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="8%"><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="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 valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">BASIC</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(0.18</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </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">$0.60</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$0.84</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">$1.50</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="39%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">DILUTED</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(0.18</font></div>
            </td>
            <td align="left" valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></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"><font style="DISPLAY: inline; FONT-WEIGHT: bold">$</font>0.60</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$0.84</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">$1.49</font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="39%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">DIVIDENDS
      PER COMMON SHARE</font></div>
            </td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$
      0.28</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="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">$0.26</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$0.83</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">$0.76</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 valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">WEIGHTED
      AVERAGE SHARES OUTSTANDING*</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="8%"><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="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 valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">BASIC</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,949</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">42,015</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,822</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">41,808</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="39%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">DILUTED</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,949</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>
            <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">42,323</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>
            <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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">42,037</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>
            <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">42,084</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: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">*
Share and per share data for the three and nine months ended June 30, 2007 have
been retroactively adjusted to reflect a 3 for 2 stock split effective March 3,
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">See Notes
to Unaudited Condensed Consolidated Financial Statements</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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 style="WIDTH: 100%" align="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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="center">&#160;</div>
          </div>
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
          </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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      1. FINANCIAL STATEMENTS (Continued)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</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="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2008</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 valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -5.6pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2007</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="bottom" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">As
      Restated</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 8pt">(See Note
  1</font>)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">CASH
      FLOWS FROM OPERATING ACTIVITIES</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Net
      income</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;35,123</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="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;62,772</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Adjustments
      to reconcile net income to cash flows from operating
      activities:</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Unrealized
      loss on derivative instruments, net of tax</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">75,095</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="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">40,618</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Depreciation
      and amortization</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">29,369</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="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">27,194</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Deferred
      income 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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">8,203</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="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">16,194</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Manufactured
      gas plant remediation 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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(13,263</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(15,346</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Equity
      in earnings from investments, net of distributions and tax</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">388</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(749</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Cost
      of removal &#8211; asset retirement obligations</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(888</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(1,461</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Contributions
      to employee benefit plans</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(521</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(450</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Changes
      in:</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Components
      of working capital</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(31,657</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">4,705</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Other
      noncurrent assets</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">24,850</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">38,794</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="left" valign="bottom" width="54%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Other
      noncurrent liabilities</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">17,596</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="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(11,669</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Cash
      flows from operating activities</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">144,295</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="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">160,602</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">CASH
      FLOWS FROM INVESTING ACTIVITIES</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Expenditures
      for:</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Utility
      plant</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(51,472</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(37,325</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Real
      estate properties and other</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(888</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2,485</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Cost
      of removal</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(5,775</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(3,685</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Investments
      in equity investees</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(16,595</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(52,500</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Proceeds
      from asset sales</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#8212;</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="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1,792</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="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Cash
      flows used in investing activities</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(74,730</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(94,203</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">CASH
      FLOWS FINANCING ACTIVITIES</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Proceeds
      from issuance of common stock</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">13,072</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">13,947</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Proceeds
      from long-term debt</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">125,000</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#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="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Tax
      benefit from stock options exercised</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">677</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2,565</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Proceeds
      from sale-leaseback transaction</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">7,485</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">5,482</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Payments
      of long-term debt</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(3,977</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2,822</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Purchases
      of treasury stock</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(11,040</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#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="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Payments
      of common stock dividends</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(33,451</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(31,220</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Net
      payments of short-term debt</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(146,579</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</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: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(53,621</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Cash
      flows used in financing activities</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(48,813</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(65,669</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 48pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Change
      in cash and temporary investments</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">20,752</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">730</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="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Cash
      and temporary investments at beginning of period</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">5,140</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="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">4,991</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="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Cash
      and temporary investments at end of period</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;25,892</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="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;5,721</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">CHANGES
      IN COMPONENTS OF WORKING CAPITAL</font></div>
            </td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Receivables</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$(211,448</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</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: 8pt; FONT-FAMILY: times new roman">$
      (65,769</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Inventories</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">73,666</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">123,177</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(Under)/overrecovered
      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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(18,037</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">13,113</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Gas
      purchases payable</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">199,407</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(21,460</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Prepaid
      and accrued taxes, 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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">21,075</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(235</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Accounts
      payable and other</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(8,871</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">4,610</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Restricted
      broker margin accounts</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(73,016</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">6,913</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Customers&#8217;
      credit balances and deposits</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(11,632</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(44,207</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Other
      current assets</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2,801</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</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: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(11,437</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: 8pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Total</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (31,657</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">)</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: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;4,705</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="left" valign="bottom" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">SUPPLEMENTAL
      DISCLOSURES OF CASH FLOWS INFORMATION</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Cash
      paid for:</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="2%"><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="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="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 32pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Interest
      (net of amounts capitalized)</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$17,972</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="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$18,618</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="left" valign="bottom" width="54%" 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: 8pt; FONT-FAMILY: times new roman">Income
      taxes</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-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$25,477</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="11%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$37,595</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: 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 Unaudited Condensed Consolidated Financial Statements</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      1. FINANCIAL STATEMENTS (Continued)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ASSETS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="98%">
          <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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.45pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap 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">September
      30,</font></div>
            </td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.45pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" 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">2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <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: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap 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: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PROPERTY,
      PLANT AND EQUIPMENT</font></div>
            </td>
            <td valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap 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: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom"><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="70%">
              <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">Utility
      plant, at cost</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,347,117</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$1,299,445</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="70%" 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">Real
      estate properties and other, at cost</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">29,579</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></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">&#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">&#160;</font></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">28,793</font></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">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="70%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,376,696</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,328,238</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="70%" 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">Accumulated
      depreciation and amortization</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(374,391
      </font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></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">&#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">&#160;</font></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">(357,367
      </font></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">)</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="70%" 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">Property,
      plant and equipment, net</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,002,305</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></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">&#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">&#160;</font></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">970,871</font></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">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%"><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="5%"><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="5%"><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="left" valign="bottom" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">CURRENT
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            </td>
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
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            <td align="left" valign="bottom" width="70%">
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
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            <td align="left" valign="bottom" width="70%">
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">291,196</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">&#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">138,986</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="70%">
              <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">Broker
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td valign="bottom" width="70%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
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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="5%"><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="5%"><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="#cceeff">
            <td align="left" valign="bottom" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">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="5%"><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="5%"><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="left" valign="bottom" width="70%">
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            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">107,292</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">86,743</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="70%">
              <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">Regulatory
      assets</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">282,020</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">312,369</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="70%">
              <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">Derivatives,
      at fair value</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">65,751</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">44,306</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="70%">
              <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">Restricted
      cash &#8211; construction fund</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,200</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,200</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="70%" 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">Other</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">12,998</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></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">&#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">&#160;</font></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">12,390</font></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">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="70%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">472,261</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></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">&#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">&#160;</font></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">460,008</font></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">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="70%" 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">Total
      assets</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,668,027</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">&#160;</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">$2,230,745</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">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">See Notes
to Unaudited<font style="DISPLAY: inline; FONT-SIZE: 9pt">&#160;</font>Condensed
Consolidated Financial Statements</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      1. FINANCIAL STATEMENTS (Continued)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CAPITALIZATION
AND LIABILITIES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="98%">
          <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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.45pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap 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">September
      30,</font></div>
            </td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.45pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.5pt solid">
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            </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="5%"><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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            <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="5%"><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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            <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="5%"><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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            <td align="right" 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="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <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">Short-term
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%">
              <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">Gas
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">218,336</font></td>
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          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <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">Accounts
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">53,086</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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">64,386</font></td>
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          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%">
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td valign="bottom" width="70%">
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            <td valign="bottom" width="70%">
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          <tr bgcolor="white">
            <td valign="bottom" width="70%">
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            <td align="right" 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="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: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" 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="4%"><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="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="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <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">Deferred
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%">
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9,806</font></td>
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          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <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">Derivatives,
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">77,047</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%">
              <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">Manufactured
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">105,340</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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">105,340</font></td>
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          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <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">Postemployment
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">29,429</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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">25,743</font></td>
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          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%">
              <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">Regulatory
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            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <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">New
      Jersey clean energy and conservation incentive programs</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">914</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,992</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%">
              <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">Asset
      retirement obligation</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">24,146</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">23,895</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="70%" 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">Other</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6,993</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#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">&#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">7,596</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">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">493,031</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#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">&#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">499,498</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">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="70%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,668,027</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">&#160;</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">$2,230,745</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">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">See Notes
to Unaudited Condensed Consolidated Financial Statements</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="notes">NO</a>TES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="gen">GEN</a>ERAL</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
accompanying unaudited condensed consolidated financial statements have been
prepared by New Jersey Resources Corporation (NJR or the Company) in accordance
with 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 the Company. These unaudited 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
unaudited 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. 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. Retail Holdings&#8217;
two principal subsidiaries are NJR Home Services (NJRHS) and Commercial Realty
&amp; Resources (CR&amp;R).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments necessary for a fair presentation
of the results of the interim periods presented. 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Common
Stock Equity</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
January 23, 2008, NJR&#8217;s Board of Directors approved a 3 for 2 stock split of the
Company&#8217;s common stock in the form of a dividend for the Company&#8217;s common stock
shareholders of record on February 8, 2008. The additional shares were issued on
March 3, 2008, resulting in an increase in average shares outstanding from
approximately 28 million to approximately 42 million. All share-related
information for prior periods has been adjusted throughout this report on a
retroactive basis to reflect the effects of the stock split.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Customer
Accounts Receivable</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Customer
accounts receivable include outstanding billings from the following subsidiaries
as of:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="37%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="bottom" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="5" 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">September
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">($&#160;in&#160;thousands)</font></div>
            </td>
            <td colspan="4" valign="bottom" width="21%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.8pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="5" valign="bottom" 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">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="37%">
              <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">NJNG</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;45,523</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">13</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;5,583</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="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">4</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">%</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="37%">
              <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">NJRES</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">289,371</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="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">84</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" 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">120,274</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="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">91</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 valign="top" width="37%" 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">NJRHS
      and other</font></div>
            </td>
            <td align="right" valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">8,254</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3</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="top" 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="top" 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">6,587</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="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">5</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 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$343,148</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">100</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td valign="top" 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">$132,444</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="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">100</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" 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">%</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accounts
receivable related to estimated unbilled revenues and allowance for doubtful
accounts are associated with NJNG only.</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 style="WIDTH: 100%" align="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: 18pt" align="center">&#160;</div>
          </div>
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">New
Accounting Standards</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Recently
Adopted</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 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.</font>
<font style="DISPLAY: inline; FONT-STYLE: italic">Adoption of FIN 48 and Income
Taxes</font>.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Not
Yet Adopted</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
September&#160;2006, the FASB issued SFAS No.&#160;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 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
February 2007, the FASB issued SFAS No. 159, <font style="DISPLAY: inline; FONT-STYLE: italic">The</font> <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, for which the
Company chooses to apply the fair value option, 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.
39. </font>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&#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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 potential impact on its statement of financial position
and results of operations.</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
December 4, 2007, the FASB issued SFAS No. 160, <font style="DISPLAY: inline; FONT-STYLE: italic">Non-controlling 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 non-controlling interest in one or more
subsidiaries. SFAS 160 clarifies that a non-controlling 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In March
2008, the FASB issued SFAS No. 161, <font style="DISPLAY: inline; FONT-STYLE: italic">Disclosures about Derivative
Instruments and Hedging Activities,</font> (SFAS 161). SFAS 161 requires
enhanced qualitative and quantitative disclosures on the objectives and
accounting for derivatives and related hedging activities, as well as their
impact to the financial statements. SFAS 161 is effective for fiscal years and
interim periods beginning after November 15, 2008. Early application and as well
as comparative disclosures for earlier periods at initial adoption are
encouraged. The Company is currently evaluating the effect of adoption of SFAS
161 on its footnote disclosures.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Restatement</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subsequent
to the issuance of June 30, 2007 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
Unaudited 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&#8217;s Quarterly Report on Form 10-Q as
of and for the three and nine-month periods ended June 30, 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accordingly,
the following tables set forth the effects of the restatement on applicable line
items in the Unaudited Condensed Consolidated Statements of Income and Unaudited
Condensed Consolidated Statements of Cash Flows for the three and nine months
ended June 30, 2007. 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 the three and nine months ended June 30, 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="33%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td colspan="3" valign="top" width="34%" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Three
      Months Ended</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30, 2007</font></div>
              </td>
              <td colspan="3" valign="top" width="33%" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Nine
      Months Ended</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30, 2007</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="bottom" width="33%" 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: 9pt; FONT-STYLE: italic; FONT-FAMILY: times new roman, times new roman, serif">(Thousands)</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">As</font></div>
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Previously</font></div>
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Reported</font></div>
              </td>
              <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Adjustment</font></div>
              </td>
              <td 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">As</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Restated</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-LEFT: black 0.5pt solid; 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">As</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Previously</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Reported</font></div>
              </td>
              <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Adjustment</font></div>
              </td>
              <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">As</font></div>
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Restated</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</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">Operating
      revenue</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$665,358</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;(3,140)</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$662,218</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$2,431,459</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;(2,797)</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: 8pt; FONT-FAMILY: times new roman">$2,428,662</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Gas
      purchases</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$610,178</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$(55,261)</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$554,917</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$2,034,332</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;65,566</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: 8pt; FONT-FAMILY: times new roman">$2,099,898</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      operating expenses</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$670,931</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$(55,261)</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$615,670</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$2,245,447</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;65,566</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: 8pt; FONT-FAMILY: times new roman">$2,311,013</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      (Loss) Income</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (5,573)</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;52,121</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;46,548</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;186,012</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$(68,363)</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;117,649</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      income</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;1,758</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;(677)</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;1,081</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;5,397</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;(2,165)</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;3,232</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(Loss)
      Income before income taxes and equity in earnings of
      affiliates</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (9,202)</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;51,444</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;42,242</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;171,056</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (70,528)</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;100,528</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(Loss)
      Income tax provision</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (4,250)</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;21,522</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;17,272</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;67,357</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (28,299)</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;39,058</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Equity
      in earnings, net of tax</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;407</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;407</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;1,302</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;1,302</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      (Loss) Income</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (4,952)</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;30,329</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;25,377</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;103,699</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$
      (40,927)</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;62,772</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="33%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Basic
      (loss)earnings per share*</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;(0.18)</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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;0.78</font></div>
              </td>
              <td align="right" valign="bottom" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;0.60</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;3.72</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;(2.22)</font></div>
              </td>
              <td align="right" valign="bottom" width="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;1.50</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="top" width="33%" style="BORDER-BOTTOM: black 1.5pt double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Diluted
      (loss) earnings per share*</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 1.5pt double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;(0.18)</font></div>
              </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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;0.78</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 1.5pt double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;0.60</font></div>
              </td>
              <td align="right" valign="bottom" width="12%" style="BORDER-LEFT: black 0.5pt solid; 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: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;3.70</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;(2.21)</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;1.49</font></div>
              </td>
            </tr>
        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">*&#160;&#160;Per
share data for 2007 has been retroactively adjusted to reflect a 3 for 2 stock
split effective March 3, 2008.</font></div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CASH
FLOWS FROM OPERATING ACTIVITIES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="98%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="55%"><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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font></td>
            <td colspan="10" nowrap valign="bottom" width="35%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30, 2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; 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="55%" 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: 9pt; FONT-STYLE: italic; FONT-FAMILY: times new roman, times new roman, serif">(Thousands)</font></div>
            </td>
            <td colspan="4" valign="bottom" width="15%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font>
      <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">As</font>
      <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Previously</font></div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Reported</font></div>
            </td>
            <td colspan="4" valign="bottom" width="15%" style="BORDER-BOTTOM: black 0.5pt solid; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font>
      <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Adjustment</font></td>
            <td colspan="4" valign="bottom" width="15%" style="BORDER-BOTTOM: black 0.5pt solid; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;</font>
      <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">As</font>
      <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Restated</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="55%">
              <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">Net
      Income</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">103,699</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(40,927</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">62,772</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="55%">
              <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">Unrealized
      loss (gain) on derivative instruments, net of tax</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(309</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">40,927</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">40,618</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="55%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Equity
      in earnings from investments, net of distributions and tax</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(749</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(749</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="55%">
              <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">Other
      noncurrent assets</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">39,347</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(553</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">38,794</font></td>
            <td align="left" nowrap valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="55%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Other
      noncurrent liabilities</font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</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">(12,971</font></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">)</font></td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,302</font></td>
            <td align="left" nowrap valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</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">(11,669</font></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">)</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="reg">REG</a>ULATION</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Filed
Base Rate Case and Signed Stipulation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As a
result of increases in NJNG&#8217;s operation, 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
request 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.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On July
30, 2008, NJNG and&#160;the Department of the Public Advocate, Division of Rate
Counsel (Rate Counsel)&#160;signed an agreement that stipulated the principal
financial terms of a settlement of its petitioned rate increase. Pending final
review and approval by the BPU, NJNG would receive a revenue increase to its
base rates of approximately $32.5 million, which is inclusive of an approximate
$13 million impact of a change to the conservation incentive program baseline
usage level, receive an allowed return on equity component of 10.3 percent,
reduce its depreciation expense component from 3.0 percent to 2.34 percent, and
reduce its depreciation expense by $1.6 million annually as a result of the
amortization of previously recovered asset retirement obligations, all of which
are expected to commence on or about October 1, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As a
result of the signed stipulation, NJNG recorded an aggregate after-tax charge in
the third quarter of fiscal 2008 of approximately $1.5 million, as it determined
that certain regulatory assets were no longer recoverable in future rates from
customers (approximately $769,000) and changed its computation for its allowance
for funds used during construction (approximately $744,000).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Conservation
Incentive Program (CIP)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 over a one-year period 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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          </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On May
30, 2008, NJNG filed a petition with the BPU for the Annual Review of its CIP
Program for recoverable CIP amounts for fiscal 2008 and to adjust its CIP
recovery rates effective October 1, 2008. This petition is asking to recover an
additional $6.8 million.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 June 30, 2008, NJNG had a remaining liability of $914,000 related to these
programs.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Basic
Gas Supply Service</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">BGSS is a
BPU approved rate mechanism designed to allow for the recovery of natural gas
commodity costs. NJNG periodically adjusts its rates for its residential and
small commercial customers to reflect increases or decreases in the cost of
natural gas sold to customers.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">On
      October 3, 2007, the BPU provisionally approved a decrease to NJNG&#8217;s BGSS
      rate effective October 4, 2007, which resulted in a 3.6 percent decrease
      to the average residential heating customer bill. On June 24, 2008, the
      Administrative Law Judge in this proceeding approved a settlement of the
      parties to make the provisional rates final. The Judge&#8217;s decision is
      currently pending final approval before the BPU.</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 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 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">On
      November 26, 2007, NJNG notified the BPU that it would provide refunds to
      customers and subsequently issued a credit totaling $32.0 million in
      December 2007, as a result of the decrease in the anticipated costs of
      wholesale natural gas prices.</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 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 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">In
      March 2008, NJNG, the BPU staff and the New Jersey Department of the
      Public Advocate, Division of Rate Counsel (Rate Counsel) entered into a
      stipulation to resolve certain matters related to NJNG&#8217;s fiscal year 2007
      BGSS filing. This stipulation was approved by the BPU on May 9, 2008 and
      resulted in NJNG recording a non-recurring settlement charge to its BGSS
      costs of $300,000.</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 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 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">On
      May 30, 2008, NJNG filed for an increase to the periodic BGSS factor to be
      effective October 1, 2008 that would increase an average residential
      customer&#8217;s bill by approximately 18.0 percent due to an increase in the
      price of wholesale natural gas. A public hearing on this issue is
      scheduled for July 31, 2008.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Other
Incentive Programs</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 retained by NJNG from 20.0 percent to 15.0 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 the finalization of the base
rate case proceedings. Pending final review and approval by the BPU, the July
30, 2008 agreement among NJNG and Rate Counsel provides for the extension of the
incentive programs through October 31, 2011, along with a moderate expansion of
the storage incentive and FRM programs.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Societal
Benefits Clause (SBC) and Weather Normalization Clause (WNC)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The SBC
is comprised of three primary components: a Universal Service Fund rider (USF),
a Manufactured Gas Plant (MGP) Remediation Adjustment Clause (RAC), and the New
Jersey Clean Energy Program (NJCEP).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
October 2007, the BPU approved the following adjustments to recovery rates
associated with the SBC programs:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">$14.7
      million in eligible costs to be recovered annually for MGP remediation
      expenditures incurred through June 30,
2006;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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, wingdings">&#376;</font></div>
            </td>
            <td 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">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 the underrecovery of
      prior fiscal year obligations (NJNG&#8217;s liability as of June 30, 2008 was
      $4.2 million); and,</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>&#160;</div>
    <div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr>
              <td 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, wingdings">&#376;</font></div>
              </td>
              <td 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">a
      decrease to the statewide USF recovery rate, which has a negligible impact
      on customer rates.</font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div><br></div>
    <div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="79%" 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 style="DISPLAY: block; TEXT-INDENT: 0pt">&#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">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 gross
margin variations incurred during the fiscal 2005 and 2006 winter periods. In
its May 30, 2008 CIP filing with the BPU, NJNG has proposed decreasing its
current WNC rate to fully recover its remaining balance of approximately $1.5
million.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
February 2008, NJNG filed an application regarding its SBC. The overall request
would result in no change to the current rates approved in October
2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In June
2008, the natural gas utilities in the State of New Jersey collectively filed
with the BPU to increase the statewide USF recovery rate effective October 1,
2008. NJNG believes the increase will have a negligible impact on
customers.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Regulatory
Assets&#160;&amp; Liabilities</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company had the following regulatory assets, all related to NJNG, on the
Unaudited Condensed Consolidated Balance Sheets:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="36%" 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: 9pt; FONT-STYLE: italic; FONT-FAMILY: times new roman, times new roman, serif">&#160;(Thousands)</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2008</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: 9pt; 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: 9pt; 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Recovery
      Period</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="36%">
              <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">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="3%"><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="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="36%">
              <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">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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;1,454</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Less
      than one year <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(1)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="36%">
              <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
      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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">8,454</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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>
            </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%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Less
      than one year <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(2)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="36%" 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: 9pt; 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">21,913</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="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: 9pt; 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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Less
      than one year <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(3)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="36%" 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: 9pt; 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;31,821</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="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: 9pt; 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="36%">
              <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">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="3%"><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="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="36%">
              <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">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="3%"><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="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="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;87,415</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(4)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 24pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">105,340</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(5)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="36%">
              <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">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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2,476</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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>
            </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%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(6)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="36%">
              <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 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">12,726</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Various<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(7)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="36%">
              <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">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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">30,133</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(8)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="36%">
              <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">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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">33,463</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(9)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="36%" 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: 9pt; 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">10,467</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="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: 9pt; 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 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Various<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (10)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="36%" 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: 9pt; 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$282,020</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="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: 9pt; 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>
      <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">(1)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Recoverable
      as a result of BPU approval in October 2007, without interest. This
      balance reflects the net results for the winter period of fiscal 2006. No
      new WNC activity is being recorded due to the existence of the
      CIP.</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">(2)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">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">(3)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $10.2 million relating to the weather component of
      the calculation and approximately $11.7 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">(4)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">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">(5)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Estimated
      future expenditures. Recovery will be included in rates 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">(6)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $0.7 million relating to the weather component of
      the calculation and approximately $1.7 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">(7)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">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">(8)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">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">(9)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">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">(10)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Recoverable
      with interest, subject to BPU
approval.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="79%" 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company had the following regulatory liabilities, all related to NJNG, on the
Unaudited Condensed Consolidated Balance Sheets:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="98%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%" 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-STYLE: italic; FONT-FAMILY: times new roman">&#160;(Thousands)</font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap 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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="4" valign="bottom" width="15%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">September
      30,</font> </div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <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">Regulatory
      liability&#8211;current</font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap 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="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap 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="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%" 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">Overrecovered
      gas costs</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">&#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">$</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"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>&#8212;</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">&#160;</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">$</font></td>
            <td align="right" valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9,583</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total
      current</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>&#8212;</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9,583</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%">
              <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">Regulatory
      liabilities&#8211;noncurrent</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="5%"><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="6%"><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 valign="bottom" width="70%">
              <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">Cost
      of removal obligation <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)</font></font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">62,232</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">60,094</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="70%" 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">Market
      development fund (MDF) <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(2)</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">&#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">&#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">&#8212;</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">&#160;</font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#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">1,176</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">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="70%" 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">Total-noncurrent</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">62,232</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></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">&#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">$</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">61,270</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">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">(1)</font></div>
            </td>
            <td valign="top" width="75%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">NJNG
      accrues and collects for cost of removal in rates. This liability
      represents collections in excess of actual expenditures. Approximately
      $20.6 million, including accretion of $1.1 million for the nine-month
      period ended June 30, 2008 of regulatory assets relating to asset
      retirement obligations have been netted against the cost of removal
      obligation as of June 30, 2008 (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">(2)</font></div>
            </td>
            <td 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">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="n3">DERI</a>VATIVE INSTRUMENTS</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company and its subsidiaries are involved in the wholesale purchase and sale of
natural gas. Under EITF 03-11, <font style="DISPLAY: inline; FONT-STYLE: italic">Reporting Realized Gains and Losses
on Derivative Instruments That Are Subject to FASB Statement No. 133 and Not
"Held for Trading Purposes" as Defined in Issue No 02-3,</font> NJR has
concluded that this is non-trading activity, and therefore, to the extent the
natural gas is physically delivered, NJR presents its revenues and cost of gas
on a gross basis in the Unaudited Condensed Consolidated Statements of Income.
Changes in the fair values of financial derivative transactions as well as
certain physical commodity contracts, as described below, are recognized as a
component of Gas purchases in the Unaudited Condensed Consolidated Statements of
Income.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
October 1, 2007, the Company changed the treatment of its physical commodity
contracts at NJRES, such that the changes in fair value of contracts entered
into after September 30, 2007 are now included currently in earnings, 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 Unaudited Condensed Consolidated
Balance Sheets, with changes in fair value being reflected as a component of gas
purchases on the Unaudited 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 met and were designated under the normal
purchase normal sale scope exception, continue to be accounted for under
settlement accounting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All of
the Company&#8217;s derivative financial instruments (financial futures, options or
swaps), are accounted for in accordance with SFAS&#160;133 and recorded at fair
value in the Unaudited Condensed Consolidated Balance Sheets. Changes in fair
value, which are referred to as unrealized gains and losses are recorded as a
component of Gas purchases or Operating revenues, for NJRES and NJR Energy,
respectively, in the Unaudited Condensed Consolidated Statements of Income.
Changes in fair value of NJNG&#8217;s financial derivative instruments are recorded as
a component of Regulatory assets or liabilities in the Unaudited 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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company enters into financial derivative instruments as an economic hedge of the
sale of natural gas. The derivatives are marked at fair value and recognized in
the Unaudited Condensed Consolidated Statements of Income, as a component of Gas
purchases, in the current period; however, the change in value of the natural
gas is recognized only when that natural gas has been sold, which is normally in
a future period. Therefore, the realized gains or losses that result from the
settlement of these derivative instruments prior to the actual sale of the
natural gas that is being economically hedged create volatility in the results
of NJR; volatility is also created, in the opposite direction, when the actual
sale of the natural gas occurs at a later date. The true economic result will
remain unchanged regardless of the settlement of the derivative instrument
relative to the ultimate sale of the natural gas.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unrealized
gains (losses) at NJRES related to physical commodity contracts and financial
instruments and certain realized gains (losses) at NJRES related to derivative
instruments that are included as a component of Gas purchases, and unrealized
gains (losses) at NJR Energy related to derivative financial instruments that
are included as a component of Operating revenues, for the three and nine months
ended June 30, 2008 and 2007, respectively, are as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="top" width="22%">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="4" valign="bottom" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">&#160;<font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(Thousands)
      </font></font></td>
            <td colspan="2" valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="2" valign="top" 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">2007</font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="35%">
              <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">NJRES
      (Included as part of Gas purchases):</font></div>
            </td>
            <td valign="top" width="8%"><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="top" width="8%"><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="8%"><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>
            <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="left" valign="top" width="35%">
              <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">Unrealized
      (losses) gains &#8211; Physical Commodity Contracts</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;(918</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.8pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;213</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="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">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#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="left" valign="top" width="35%">
              <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">Unrealized
      (losses) gains &#8211; Financial Instruments</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(37,796</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">53,459</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(165,970</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">(64,408</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="35%" 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">Certain
      net realized gains (losses) &#8211; Financial Instruments (economic
      hedge)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">22,428</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">1,802</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">26,057</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="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">(1,158</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="35%" 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-STYLE: italic; FONT-FAMILY: times new roman">Subtotal
      NJRES</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(16,286</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$55,261</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(139,700</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$(65,566</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="35%">
              <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">NJR
      Energy (Included as part of Operating revenues):</font></div>
            </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="3%"><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="3%"><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="2%"><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="left" valign="bottom" width="35%" 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">Unrealized
      gains (losses) &#8211; Financial Instruments</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10,872</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">(3,140</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">17,357</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="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">(2,797</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="35%" 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">Total
      NJRES and NJR Energy unrealized and realized (losses)
gains</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;(5,414</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$52,121</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(122,343</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$(68,363</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">)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="51%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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">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">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="51%">
              <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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;
      &#160;&#160;&#160;&#160;38</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="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;12,345</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="51%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NJNG
      broker margin (liability)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$
      (5,422</font></div>
            </td>
            <td valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt; TEXT-ALIGN: right" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-FAMILY: times new roman">&#8212;</font>&#160;&#160;</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="51%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$75,602</font></div>
            </td>
            <td valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(15,143)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I<a name="n4">NVE</a>STMENTS IN EQUITY
INVESTEES</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJR&#8217;s
Investments in equity investees include the following investments:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="51%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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">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">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="51%">
              <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">Steckman
      Ridge</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;76,118</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="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">$56,726</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="51%">
              <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">Iroquois</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">22,713</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="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">22,073</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="51%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">8,461</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="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">7,944</font></div>
            </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="51%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$107,292</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="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">$86,743</font></div>
            </td>
            <td valign="top" 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJR uses
the equity method of accounting for its investments in Steckman Ridge and
Iroquois.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
investments represent immaterial aggregate investments in equity securities of
publicly traded energy companies, 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following tables set forth the financial information for Iroquois for the
periods as indicated:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td colspan="2" valign="top" width="12%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 6.25pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="2" valign="top" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</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: 3.85pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="2" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.15pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="35%">
              <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">Operating
      revenues</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$40,854</font></div>
            </td>
            <td valign="top" 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: 2.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$39,830</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$124,309</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: 2.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$122,423</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="left" valign="bottom" width="35%">
              <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">Operating
      income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$20,609</font></div>
            </td>
            <td valign="top" width="3%"><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: 2.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$19,246</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;65,957</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: 2.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;60,958</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="35%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Net
      income</font></div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;8,493</font></div>
            </td>
            <td valign="top" 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="top" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;7,281</font></div>
            </td>
            <td valign="top" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;27,532</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: 2.65pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;23,315</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; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="51%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Millions)</font></div>
            </td>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td 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">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">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="51%" 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">Total
      assets</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$771.1</font></div>
            </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; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$814.3</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><br></div>
    <div style="TEXT-ALIGN: center">
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="TEXT-ALIGN: center">
          <tr valign="top" style="TEXT-ALIGN: center;">
            <td style="WIDTH: 24pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="n5">EAR</a>NINGS PER SHARE</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following table sets forth the calculation of the Company&#8217;s basic and diluted
earnings per share:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr bgcolor="#cceeff">
              <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td colspan="4" valign="top" width="19%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              </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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">(Thousands,
      except per share amounts)</font></div>
              </td>
              <td colspan="2" valign="top" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 6.25pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;&#160;2008</font></div>
              </td>
              <td colspan="2" valign="top" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;2007*</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: 3.85pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;&#160;2008</font></div>
              </td>
              <td colspan="2" 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">&#160;&#160;&#160;&#160;&#160;2007*</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
              <td align="right" valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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 align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; 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 align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; 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>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="top" width="39%" 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">Net
      (Loss) Income, as reported</font></div>
              </td>
              <td align="right" valign="bottom" width="8%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(7,597</font></div>
              </td>
              <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="bottom" width="7%" 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">$25,377</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$35,123</font></div>
              </td>
              <td valign="bottom" width="1%" 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">$62,772</font></div>
              </td>
              <td valign="top" width="1%" 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 valign="top" width="39%">
                <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">Basic
      earnings per share</font></div>
              </td>
              <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="2%"><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="top" 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="top" 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="top" 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="39%">
                <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">Weighted
      average shares of common stock outstanding&#8211;basic</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,949</font></div>
              </td>
              <td valign="top" 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 align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">42,015</font></div>
              </td>
              <td valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,822</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 align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,808</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 valign="top" width="39%" 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">Basic
      (loss) earnings per common share</font></div>
              </td>
              <td align="right" valign="bottom" width="8%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(0.18</font></div>
              </td>
              <td align="left" valign="top" width="2%" style="BORDER-BOTTOM: black 1.5pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="bottom" width="7%" 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">$0.60</font></div>
              </td>
              <td valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$0.84</font></div>
              </td>
              <td valign="top" width="1%" 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">$1.50</font></div>
              </td>
              <td valign="top" width="1%" 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="#cceeff">
              <td valign="top" width="39%">
                <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">Diluted
      earnings per share</font></div>
              </td>
              <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="2%"><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="top" 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="top" 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="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
            <tr bgcolor="white">
              <td valign="top" width="39%">
                <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">Weighted
      average shares of common stock outstanding&#8211;basic</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,949</font></div>
              </td>
              <td valign="top" 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">42,015</font></div>
              </td>
              <td valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,822</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">41,808</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 valign="top" width="39%" 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">Incremental
      shares **</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">&#8212;</font></div>
              </td>
              <td valign="top" 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">308</font></div>
              </td>
              <td valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">215</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="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">276</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>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="39%">
                <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">Weighted
      average shares of common stock outstanding&#8211;diluted ***</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,949</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">42,323</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">42,037</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="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">42,084</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="39%" 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">Diluted
      (loss) earnings per common share</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(0.18</font></div>
              </td>
              <td align="left" valign="top" width="2%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$0.60</font></div>
              </td>
              <td valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$0.84</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>
              <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">$1.49</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>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr>
              <td align="right" valign="top" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.4pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">*</font></div>
              </td>
              <td 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-STYLE: italic; FONT-FAMILY: times new roman">Share
      and per share data for 2007 have been retroactively adjusted to reflect a
      3 for 2 stock split effective March 3, 2008.</font></div>
              </td>
            </tr>
            <tr>
              <td align="right" valign="top" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.4pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">**</font></div>
              </td>
              <td 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-STYLE: italic; FONT-FAMILY: times new roman">Incremental
      shares consist of stock options, stock awards and performance
      units.</font></div>
              </td>
            </tr>
            <tr>
              <td align="right" valign="top" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.4pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">***</font></div>
              </td>
              <td 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-STYLE: italic; FONT-FAMILY: times new roman">The
      incremental shares noted above were not included in the computation of
      diluted loss per common share for the three months ended June 30, 2008 as
      their effect would have been
anti-dilutive.</font></div>
              </td>
            </tr>
        </table>
      </div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    </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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="deb">DEBT</a></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">NJR</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
December 13, 2007, NJR refinanced its prior senior credit facility, scheduled to
expire on December 16, 2007, for a new $325 million, five-year, revolving,
unsecured credit facility. The new credit facility permits the borrowing of
revolving loans and swing loans, as well as the issuance of letters of credit.
Swing loans are loans made available on a same day basis for an aggregate
principal amount of up to $50 million and repayable in full within a maximum of
seven days of borrowing. It also permits an increase to the facility, from time
to time, with the</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">existing
or new lenders, in a minimum of $5 million increments up to a maximum $100
million. Borrowings under the new 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 used the initial borrowings under the new
credit facility to refinance its prior credit facility and pay all related fees
and expenses. In addition, certain of NJR&#8217;s non-regulated subsidiaries have
guaranteed to the lenders all of NJR&#8217;s obligations under the new credit
facility.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
February 15, 2008, NJR entered into a new agreement for a stand-alone letter of
credit that may be drawn upon through February 15, 2009 for up to $15 million.
No amounts have been drawn under this letter of credit as of June 30,
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008, NJR had one letter of credit outstanding, totaling $500,000, on
behalf of NJRES. It was issued in conjunction with a long-term natural gas
storage agreement and expires on December 31, 2008. This letter of credit
reduces the amount available under NJR&#8217;s committed credit facility by the same
amount. NJR does not anticipate that this letter of credit will be drawn upon by
the counterparties and expects that the letter of credit will be renewed as
necessary.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">NJNG</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
October 2007, NJNG entered into a new agreement for standby letters of credit
that may be drawn upon through December 15, 2009 for up to $50 million. As of
June 30, 2008, letters of credit totaling $26.0 million have been issued under
this agreement. These letters of credit do not reduce the amount available to be
borrowed under NJNG&#8217;s credit facility. NJNG does not anticipate that these
letters of credit will be drawn upon by the counterparty, and the agreement will
be renewed as necessary, upon its expiration.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In May
2008, NJNG issued $125 million of 5.6 percent senior notes due May 15, 2018
(Notes) in the private placement market pursuant to a note purchase agreement.
The notes are secured until the release date (which is the date at which the
security provided by the pledge under NJNG&#8217;s mortgage indenture would no longer
be available to holders of any outstanding series of NJNG&#8217;s senior secured notes
and such indebtedness would become senior unsecured indebtedness) by an equal
amount of NJNG first mortgage bonds (Series LL), and interest is payable on the
Notes semi-annually. The proceeds from the Notes were used to refinance
short-term debt and will fund capital expenditure requirements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG is
obligated with respect to loan agreements securing six series of variable rate
bonds totaling approximately $97.0 million of variable-rate debt backed by
securities issued by the New Jersey Economic Development Authority (EDA). The
EDA bonds are commonly referred to as auction rate securities (ARS) and have an
interest rate reset every 7 or 35 days, depending upon the applicable series,
when an auction is held for the purposes of determining the interest rate of the
securities. The interest rate associated with the NJNG variable-rate debt is
based on the rates on the EDA ARS. As of June 30, 2008, most of the auctions
surrounding the EDA ARS have failed, resulting in those bonds bearing interest
at their maximum rates, defined in the EDA ARS as the lesser of (i) 175 percent
of 30-day LIBOR or (ii) 10 to 12 percent per annum, as applicable to such series
of ARS. As of June 30, 2008, the 30-day LIBOR rate was 2.5 percent. While the
failure of the ARS auctions does not signify or constitute a default on NJNG,
the EDA ARS does impact NJNG&#8217;s borrowing costs of the variable-rate debt. As
such, NJNG currently has a weighted average interest rate of 4.1 percent as of
June 30, 2008, compared with a weighted average interest rate of 3.9 percent as
of September 30, 2007. There can be no assurance that the EDA ARS will have
enough market liquidity to return interest rates below their maximum
rate.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
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          </div>
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        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">NJRES</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008 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 June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Consolidated</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
were no issuances or redemptions of long-term debt securities for NJR or NJRES
or redemptions for NJNG during the nine months ended June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="51%"><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: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">September
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="51%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="51%" 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">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="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="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="51%">
              <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">Long
      - term debt <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;75,000</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="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">$&#160;&#160;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="51%">
              <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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$325,000</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="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">$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 align="left" valign="top" width="51%">
              <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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$109,900</font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;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="white">
            <td align="left" valign="top" width="51%" 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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2.73</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</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">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">%</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="51%" 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">NJNG</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="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="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="white">
            <td align="left" valign="top" width="51%">
              <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">Long
      - term debt <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(2)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$379,800</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="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">$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="#cceeff">
            <td align="left" valign="top" width="51%">
              <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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$250,000</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="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">$250,000</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 9.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(3)</font></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="51%">
              <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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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="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">$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="51%" 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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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="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">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">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="51%" 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">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="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="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="51%">
              <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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;30,000</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="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">$
      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="51%">
              <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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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="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">$
      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="#cceeff">
            <td align="left" valign="top" width="51%" 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">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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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="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">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: 9.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</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-STYLE: italic; FONT-FAMILY: Times New Roman">(1)&#160;&#160;</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-STYLE: italic; FONT-FAMILY: Times New Roman">Amounts
      are comprised of $25.0 million issued in March 2004 and $50.0 million
      issued in September 2007.</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-STYLE: italic; FONT-FAMILY: Times New Roman">(2)&#160;&#160;</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-STYLE: italic; FONT-FAMILY: Times New Roman">Long-term
      debt excludes lease obligations of $61.8 million <font style="DISPLAY: inline; FONT-SIZE: 8pt">and $57.6 million </font>at June
      30, 2008 and September 30, 2007,
respectively.</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-STYLE: italic; FONT-FAMILY: Times New Roman">(3)&#160;&#160;</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-STYLE: italic; FONT-FAMILY: Times New Roman">Amount
      includes only committed credit facilities for NJNG short-term borrowings.
      Also included in short-term debt on the Unaudited Condensed Consolidated
      Balance Sheet as of September 30, 2007, is $10.5 million related to an
      uncommitted credit facility.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="cap">CAP</a>ITALIZED FINANCING COSTS AND DEFERRED
    INTEREST</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 Unaudited Condensed Consolidated Balance
Sheets, are as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" 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 align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="4" valign="top" width="18%">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="41%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td valign="top" width="2%" 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="bottom" width="6%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </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>
            <td align="right" valign="top" width="7%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td valign="top" width="2%" 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="6%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td valign="top" width="2%" 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="white">
            <td align="left" valign="bottom" 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">AFUDC
      &#8211; Utility plant</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$244</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="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$321</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;871</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="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$1,058</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="bottom" 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">Weighted
      average rate</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4.8</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.37</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4.8</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.36</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="41%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="7%"><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>
            <td valign="bottom" width="6%"><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="7%"><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>
            <td valign="bottom" width="6%"><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="left" valign="bottom" 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">Capitalized
      interest &#8211; Real estate properties and other</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;14</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="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;86</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;79</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="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;216</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="left" valign="bottom" 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">Weighted
      average interest rates</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3.01</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.34</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3.99</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.42</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="41%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="7%"><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>
            <td valign="bottom" width="6%"><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="7%"><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>
            <td valign="bottom" width="6%"><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="left" valign="bottom" 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">Capitalized
      interest &#8211; Investments in equity investees</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$827</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="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$716</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 align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,513</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="6%">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;927</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="bottom" 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">Weighted
      average interest rates</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.58</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.35</font></div>
            </td>
            <td align="left" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.73</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5.36</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The AFUDC
amounts shown in the table above for three and nine months ended June 30, 2008
and 2007, represent an interest cost component only, as agreed to in NJNG&#8217;s
signed stipulation with Rate Counsel&#160;as discussed in Note 2. <font style="DISPLAY: inline; FONT-STYLE: italic">Regulation &#8211; Filed Base Rate Case
and Signed Stipulation</font>.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 includes $515,000 and $698,000 of
interest related to these SBC program costs for the three months ended June 30,
2008 and 2007, respectively, and $1.9 million and $2.3 million for the nine
months ended June 30, 2008 and 2007, respectively.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="stk">STO</a>CK-BASED
COMPENSATION</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
November 14, 2007, the Company granted 61,980 performance units, which are
market condition awards that vest in September 2010, and 61,980 shares of
restricted stock, which vest in equal installments over three years, subject to
certain conditions. On the same date, the Company also granted 35,385 restricted
shares that vested immediately. All shares noted above have been adjusted to
reflect the additional shares distributed related to NJR&#8217;s 3 for 2 stock split
on March 3, 2008 and have a split adjusted grant date fair value of
$31.84.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
the first nine months of fiscal 2008, included in operation and maintenance
expense is $2.0 million related to stock-based compensation. As of June 30, 2008
there remains $3.4 million of deferred compensation related to unvested shares
and options, which is expected to be recognized over the next 3
years.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="emp">EMP</a>LOYEE BENEFIT PLANS</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Pension
and Other Postemployment Benefit Plans (OPEB)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="21%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="8" valign="bottom" width="30%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Pension</font></div>
            </td>
            <td colspan="8" valign="top" width="27%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">OPEB</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="21%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="bottom" width="16%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -5pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Three
      Months</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -5pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -5pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
            </td>
            <td colspan="4" valign="bottom" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Nine
      Months</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
            </td>
            <td colspan="4" valign="bottom" width="13%" style="BORDER-LEFT: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Three
      Months</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
            </td>
            <td colspan="4" valign="bottom" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Nine
      Months</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: times new roman, times new roman, serif">(Thousands)</font></div>
            </td>
            <td 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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2008</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 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">2007</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 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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2008</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 valign="bottom" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -3.25pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</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="5%" style="BORDER-LEFT: black 0.5pt solid; 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2008</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 valign="top" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -5.55pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</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 valign="top" width="6%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2008</font></div>
            </td>
            <td valign="top" 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 valign="top" width="6%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -3.8pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2007</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>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="21%">
              <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">$&#160;&#160;&#160;&#160;728</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="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;733</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      2,185</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="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">$
      2,200</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="5%" style="BORDER-LEFT: 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">$
      436</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="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">$&#160;&#160;&#160;454</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="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">$1,360</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      1,364</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="21%">
              <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">1,648</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="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></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">4,945</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="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">4,661</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="5%" style="BORDER-LEFT: 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">810</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="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">757</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="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">2,441</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></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">2,271</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="21%">
              <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">(2,183</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="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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="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="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">(6,548</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="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">(6,156</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>
            <td align="right" valign="bottom" width="5%" style="BORDER-LEFT: 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">(627</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">(541</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">(1,837</font></div>
            </td>
            <td align="left" valign="top" 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="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">(1,622</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>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="21%">
              <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">275</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="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></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">826</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="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">1,197</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="5%" style="BORDER-LEFT: 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">181</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="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">266</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="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">624</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></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">797</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="21%">
              <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">14</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="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; 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="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></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">42</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="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">63</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="5%" style="BORDER-LEFT: 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">19</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="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">20</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="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">58</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></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">59</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="21%" 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">&#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="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">&#8212;&#160;</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="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="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="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="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="5%" style="BORDER-LEFT: black 0.5pt solid; 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="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">89</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">267</font></div>
            </td>
            <td valign="top" 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="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">268</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>
          </tr>
          <tr bgcolor="white">
            <td align="left" 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="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">$&#160;&#160;&#160;&#160;482</font></div>
            </td>
            <td valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;655</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="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">$
      1,450</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="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">$
      1,965</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="5%" style="BORDER-LEFT: black 0.5pt solid; 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">$
      908</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>
            <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">$1,045</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>
            <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">$2,913</font></div>
            </td>
            <td valign="top" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$
      3,137</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="aro">ASSE</a>T RETIREMENT OBLIGATIONS
(ARO)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 pipelines out of
service.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following is an analysis of the change in the ARO liability for the period ended
June 30, 2008, (in thousands):</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="56%" style="BORDER-TOP: 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">Balance
      at October 1, 2007</font></div>
            </td>
            <td align="right" valign="top" width="21%" style="BORDER-TOP: 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">$23,895</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-TOP: 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="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">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">1,050</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="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">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">89</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 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">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">(888</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: 1.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance
      at June 30, 2008</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$24,146</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; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accretion
amounts are not reflected as an expense on NJR&#8217;s Unaudited 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 Unaudited Condensed Consolidated Balance Sheet.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="adop">ADO</a>PTION OF FIN 48 AND INCOME
  TAXES</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 $2.2 million, as well
as the additional amount recognized associated with the adoption of FIN 48, are
included as a component of Deferred and accrued taxes in the Current
classification of the Unaudited Condensed Consolidated Balance Sheets. The
following table represents the increase in liability with respect to the
adoption of FIN 48:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="64%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="14%">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">As
      of October 1,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="64%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">($
      in millions)</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="64%">
              <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">Increase
      in Retained Earnings (cumulative effect)</font></div>
            </td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 7.35pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;1.2</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="64%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Decrease
      in Deferred income taxes</font></div>
            </td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.35pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;(4.3)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="64%" 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">Increase
      in Deferred and accrued taxes (FIN 48 liability)</font></div>
            </td>
            <td valign="top" width="14%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 7.35pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;3.1</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
Unaudited Condensed Consolidated Balance Sheets.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 fixed assets at NJNG. The Company filed an automatic
change in method of accounting, which is currently under audit with the
Internal</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
Unaudited Condensed Consolidated Statements of Income.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company and one or more of its subsidiaries files, or expects to file, income
and or franchise tax returns in the United States Federal jurisdiction and in
the states of New Jersey, New York, Connecticut, Texas and Louisiana. The
Company neither files in, nor believes it has a filing requirement in, any
foreign jurisdictions.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Included
in the Unaudited Condensed Consolidated Statement of Operations, as part of
Income tax expense, is a one-time after-tax interest charge of $0.98 million to
correct a previously taken tax position associated with utility property at
NJNG.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company is not currently under examination in any state; however, all periods
subsequent to those ended September 30, 2003 are statutorily open to examination
with the exception of New York, in which all periods subsequent to September 30,
2004 are statutorily open to examination. As previously disclosed, NJNG was
party to a case pending before the Tax Court of New Jersey (Tax Court). In that
case, NJNG disputed the State of New Jersey&#8217;s (State) application of its tax
apportionment rules. On April 15, 2008 the Tax Court issued a decision in favor
of the State. On June 19, 2008, NJNG filed an appeal with the Appellate Division
of the Superior Court of New Jersey. The obligation under this decision, plus
penalties and interest totals approximately $3.1 million, which was previously
fully reserved for under FIN 48. To prevent the accrual of additional interest,
it is expected that NJNG will pay the obligation and convert the filing to a
claim for refund. The effect of the Tax Court&#8217;s decision will not impact the
Company&#8217;s effective tax rate, as this amount had been fully reserved for and was
reflected as a component of current Deferred and accrued taxes in the Unaudited
Condensed Consolidated Balance Sheets.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 24pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="comm">COMMI</a>TMENTS AND CONTINGENT
  LIABILITIES</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Cash
Commitments</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 $98.4 million at current contract rates
and volumes, which are recoverable through the BGSS.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 June 30, 2008, NJRES had contractual obligations for current demand
charges related to storage contracts and pipeline capacity contracts of $22.7
million and $43.0 million, respectively.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008, there were NJR guarantees covering approximately $443 million of
natural gas purchases and demand fee commitments of NJRES and NJNG not yet
reflected in Accounts payable on the Unaudited Condensed Consolidated Balance
Sheet. Commitments as of June 30, 2008 for natural gas purchases and
future</font></div>
    <div><br></div>
    <div>
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          </div>
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        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">demand
fees, for the next five fiscal year periods, are as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="18%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
              </td>
              <td valign="top" width="9%" 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">2008</font></div>
              </td>
              <td valign="top" width="2%" 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="8%" 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">2009</font></div>
              </td>
              <td valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 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">2010</font></div>
              </td>
              <td valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 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">2011</font></div>
              </td>
              <td valign="top" width="2%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="bottom" width="7%" 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">2012</font></div>
              </td>
              <td valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 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">Thereafter</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="18%">
                <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"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NJRES</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="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="2%"><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="top" width="2%"><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="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="2%"><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>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="18%">
                <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">Natural
      gas purchases</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">$303,137</font></div>
              </td>
              <td valign="top" width="2%"><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">$479,657</font></div>
              </td>
              <td valign="top" width="2%"><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">$189,877</font></div>
              </td>
              <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</font></div>
              </td>
              <td valign="top" 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">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</font></div>
              </td>
              <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="18%">
                <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">Storage
      demand fees</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">7,465</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="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">19,489</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="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">11,520</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="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">8,310</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">5,846</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="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">3,022</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="18%" 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">Pipeline
      demand fees</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1pt 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">16,235</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">32,721</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">19,107</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">16,249</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">6,809</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">9,017</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="18%" 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">Sub-total
      NJRES</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1pt 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">$326,837</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$531,867</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$220,504</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$24,559</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$12,655</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;12,039</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="18%">
                <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"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NJNG</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="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="2%"><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="top" width="2%"><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="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="bottom" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td valign="top" width="2%"><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>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="18%">
                <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">Natural
      gas purchases</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">$116,271</font></div>
              </td>
              <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;56,802</font></div>
              </td>
              <td valign="top" width="2%"><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">$&#160;18,016</font></div>
              </td>
              <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;1,529</font></div>
              </td>
              <td valign="top" 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">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</font></div>
              </td>
              <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="9%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#8212;</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="18%">
                <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">Storage
      demand fees</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">6,123</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="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">21,938</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="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">22,175</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="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">15,563</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">7,853</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="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">11,731</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="18%" 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">Pipeline
      demand fees</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1pt 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">13,733</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">73,898</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">81,765</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">80,441</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">74,422</font></div>
              </td>
              <td align="right" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">156,341</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="18%" 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">Sub-total
      NJNG</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1pt 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">$136,127</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$152,638</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$121,956</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$97,533</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$82,275</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$168,072</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="top" width="18%" style="BORDER-BOTTOM: black 2.25pt 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">Total</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 2.25pt 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">$462,964</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 2.25pt 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 2.25pt 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">$684,505</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 2.25pt 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 2.25pt 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">$342,460</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 2.25pt 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 2.25pt 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">$122,092</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 2.25pt 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 2.25pt 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">$94,930</font></div>
              </td>
              <td align="right" valign="top" width="2%" style="BORDER-BOTTOM: black 2.25pt 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 2.25pt 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">$180,111</font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#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">Costs for
storage and pipeline demand fees, included as a component of Gas purchases on
the Unaudited Condensed Consolidated Statements of Income, are as
follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="98%">
          <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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="6" nowrap valign="bottom">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="6" nowrap valign="bottom">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td align="left" nowrap valign="bottom"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" 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-STYLE: italic; FONT-FAMILY: times new roman">(Millions)</font></div>
            </td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 0.25pt solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="40%">
              <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">NJRES</font></div>
            </td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$29.4</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$29.5</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;
      88.4</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$106.9</font></td>
            <td align="left" nowrap valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="40%" 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">NJNG</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">17.9</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#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">&#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">17.8</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">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">56.0</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#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">&#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">56.0</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">&#160;</font></td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="40%" 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">Total</font></div>
            </td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">&#160;</td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$47.3</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">&#160;</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">$47.3</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">&#160;</font></td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">&#160;</td>
            <td align="right" valign="bottom" width="5%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$144.4</font></td>
            <td align="left" nowrap valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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">&#160;</font></td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double">&#160;</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">$162.9</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">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG&#8217;s
capital expenditures are estimated at $81.8 million for fiscal 2008, of which
approximately $57.2 million has been incurred to date, 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company&#8217;s future minimum lease payments under various operating leases are less
than $3.2 million annually for the next five years and $2.1 million in the
aggregate for all years thereafter.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Legal
Proceedings</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Manufactured Gas Plant
Remediation</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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), 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 June 30, 2006. As of June 30, 2008, $87.4 million
of previously incurred remediation costs, net of recoveries from customers and
insurance proceeds, are included in Regulatory assets on the Unaudited Condensed
Consolidated Balance Sheet.</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 Unaudited 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">General</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 24pt">
              <div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="bus">BUSI</a>NESS SEGMENT DATA</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Information
related to the Company&#8217;s various business segments, which are presented in the
Unaudited Condensed Consolidated Statements of Income, is detailed
below.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 investments in energy and mid-stream assets, appliance and
installation services, commercial real estate development and other corporate
activities.</font></div>
    <div><br></div>
    <div>
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        <div id="FTR">
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          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)</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 style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr bgcolor="#cceeff">
              <td valign="top" width="28%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td colspan="4" valign="top" width="25%">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              </td>
              <td colspan="4" valign="top" width="25%">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td align="left" valign="top" width="28%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
              </td>
              <td valign="top" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
              </td>
              <td valign="top" width="2%" 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="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
              </td>
              <td valign="top" width="2%" 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="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
              </td>
              <td valign="top" width="2%" 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="11%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
              </td>
              <td valign="top" width="2%" 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="white">
              <td valign="bottom" width="28%">
                <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">Operating
      Revenues</font></div>
              </td>
              <td valign="top" width="10%"><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>
              <td valign="top" width="10%"><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>
              <td valign="top" width="10%"><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>
              <td valign="top" width="11%"><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 valign="bottom" width="28%">
                <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">Natural
      Gas Distribution</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;179,511</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="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$180,980</font></div>
              </td>
              <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;940,689</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="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;871,198</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 valign="bottom" width="28%">
                <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">Energy
      Services</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">801,628</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="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">476,383</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="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,009,751</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="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,540,558</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 valign="bottom" width="28%" 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">Retail
      and Other</font></div>
              </td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">19,344</font></div>
              </td>
              <td valign="bottom" width="2%" 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="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,926</font></div>
              </td>
              <td valign="bottom" width="2%" 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="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">38,834</font></div>
              </td>
              <td valign="bottom" width="2%" 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="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">17,117</font></div>
              </td>
              <td valign="bottom" width="2%" 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="white">
              <td valign="bottom" width="28%">
                <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">Subtotal</font></div>
              </td>
              <td align="right" valign="bottom" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,000,483</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="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">662,289</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="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,989,274</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="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,428,873</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 valign="bottom" width="28%" 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">Intersegment
      revenues <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(44</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(71</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" 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">)</font></div>
              </td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(152</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(211</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" 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">)</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="28%" style="BORDER-BOTTOM: black 1pt 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">Total</font></div>
              </td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$<font style="DISPLAY: inline; FONT-WEIGHT: bold">1,000,439</font></font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$662,218</font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$<font style="DISPLAY: inline; FONT-WEIGHT: bold">2,989,122</font></font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,428,662</font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="28%">
                <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">Operating
      Income (Loss)</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="2%"><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="2%"><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="2%"><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="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="28%">
                <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">Natural
      Gas Distribution</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;7,552</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="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;7,562</font></div>
              </td>
              <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;98,365</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="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;103,014</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 valign="bottom" width="28%">
                <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">Energy
      Services</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(25,952</font></div>
              </td>
              <td align="left" valign="bottom" width="2%">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">40,158</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="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(48,692</font></div>
              </td>
              <td align="left" valign="bottom" width="2%">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">15,587</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 valign="bottom" width="28%" 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">Retail
      and Other</font></div>
              </td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">12,707</font></div>
              </td>
              <td valign="bottom" width="2%" 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="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(1,172</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" 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">)</font></div>
              </td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">19,506</font></div>
              </td>
              <td valign="bottom" width="2%" 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="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(952</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" 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">)</font></div>
              </td>
            </tr>
            <tr bgcolor="#cceeff">
              <td valign="bottom" width="28%" style="BORDER-BOTTOM: black 1pt 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">Total</font></div>
              </td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;(5,693</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt double">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;46,548</font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">69,179</font></font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;117,649</font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
            <tr bgcolor="white">
              <td valign="bottom" width="28%">
                <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">Net
      Income (Loss)</font></div>
              </td>
              <td valign="top" width="10%"><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>
              <td valign="top" width="10%"><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>
              <td valign="top" width="10%"><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>
              <td valign="top" width="11%"><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 valign="bottom" width="28%">
                <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">Natural
      Gas Distribution</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;147</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="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;2,602</font></div>
              </td>
              <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;50,987</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="11%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;55,736</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 valign="bottom" width="28%">
                <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">Energy
      Services</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(15,546</font></div>
              </td>
              <td align="left" valign="bottom" width="2%">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">23,264</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="top" width="10%">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(28,343</font></div>
              </td>
              <td align="left" valign="bottom" width="2%">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">6,805</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 valign="bottom" width="28%" 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">Retail
      and Other</font></div>
              </td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">7,802</font></div>
              </td>
              <td valign="bottom" width="2%" 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="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(489</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">12,479</font></div>
              </td>
              <td valign="bottom" width="2%" 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="bottom" width="11%" style="BORDER-BOTTOM: black 0.25pt solid">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">231</font></div>
              </td>
              <td valign="bottom" width="2%" 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="white">
              <td valign="bottom" width="28%" 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">Total</font></div>
              </td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;(7,597</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
              </td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;25,377</font></div>
              </td>
              <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;35,123</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="11%" style="BORDER-BOTTOM: black 1.5pt double">
                <div align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;62,772</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-STYLE: italic; FONT-FAMILY: Times New Roman">(1)&#160;&#160;</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-STYLE: italic; FONT-FAMILY: Times New Roman">Consists
      of transactions between subsidiaries that are eliminated in
      consolidation.</font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#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">As of
June 30, 2008, NJRES&#8217; assets have increased more than 5 percent as compared to
September 30, 2007, primarily due to higher Accounts receivable balances as a
result of greater volumes and prices of wholesale natural gas sales. NJRES&#8217;
Accounts receivable balance as of June 30, 2008 has been fully
collected.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
the nine months ending June 30, 2008, NJRES had one customer, Hess Corporation,
an investment grade rated corporation, whose sales represented more than 10
percent of its total Operating revenue.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="oth">OTH</a>ER</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At June
30, 2008, there were 41,968,713 shares of common stock outstanding, which were
adjusted to include the additional shares distributed on March 3, 2008, as a
result of a 3 for 2 stock split. As of June 30, 2008 the book value per share
was $15.67.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="mda">ITEM 2</a>. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS </font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Management&#8217;s
Overview</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES
comprises the Energy Services segment. 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.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Retail and Other segment includes 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, which is being
jointly developed and constructed with a partner in western Pennsylvania; NJR
Investment, which makes energy-related equity investments; NJR Home Services
(NJRHS), which provides service, sales and installation of appliances;
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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJR has
restated the financial statements for the three and nine month periods ended
June 30, 2007 related to a correction in the accounting for certain derivative
financial instruments. See <font style="DISPLAY: inline; FONT-STYLE: italic">Note 1. General</font> in the
Unaudited Condensed Consolidated Financial Statements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
income by business segment is as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="17%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="8" valign="bottom" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
            </td>
            <td colspan="8" valign="bottom" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Nine
      Months Ended</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">June
  30,</font></font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="17%" 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: 9pt; FONT-STYLE: italic; FONT-FAMILY: times new roman, times new roman, serif">(Thousands)</font></div>
            </td>
            <td colspan="4" valign="bottom" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2008</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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2007</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2008</font></div>
            </td>
            <td colspan="4" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="17%">
              <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">Net
      Income (Loss)</font></div>
            </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="2%"><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="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="6%"><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>
            <td valign="bottom" width="3%"><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="7%"><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>
            <td valign="bottom" width="4%"><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>
            <td valign="bottom" width="7%"><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>
            <td valign="bottom" width="2%"><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="left" valign="bottom" width="17%">
              <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">Natural
      Gas Distribution</font></div>
            </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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;&#160;&#160;147</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="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(2</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-WEIGHT: bold; FONT-SIZE: 9pt; 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;2,602</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">10</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</font></div>
            </td>
            <td align="right" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$
      50,987</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="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">145</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$55,736</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="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">89</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="17%">
              <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">Energy
      Services</font></div>
            </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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(15,546</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">205</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">23,264</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="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: times new roman, times new roman, serif">92</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</font></div>
            </td>
            <td align="right" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(28,343</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(81</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-WEIGHT: bold; FONT-SIZE: 9pt; 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">6,805</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">11</font></div>
            </td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="17%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Retail
      and Other</font></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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">7,802</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="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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(103</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)%</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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(489</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(2</font></div>
            </td>
            <td align="left" 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="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></font></div>
            </td>
            <td align="right" valign="top" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">12,479</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="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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">36</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">231</font></div>
            </td>
            <td valign="top" 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="2%" 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: 8pt; FONT-FAMILY: times new roman">&#8212;</font></div>
            </td>
            <td align="left" valign="top" width="2%" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="17%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 16pt; 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="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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;(7,597</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">100</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$25,377</font></div>
            </td>
            <td valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">100</font></div>
            </td>
            <td align="left" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$
      35,123</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="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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">100</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#160;%</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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">$62,772</font></div>
            </td>
            <td valign="top" 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="2%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">100</font></div>
            </td>
            <td align="left" valign="top" width="2%" 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">%</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES and
NJR Energy account for certain of their 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, for contracts executed on or after 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 and are
reflected in current period results.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 natural gas
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;
reported earnings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 </font></div>
    <div><br></div>
    <div>
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23</font></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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Included
in Net (loss) income in the table above are unrealized (losses) gains in the
Energy Services segment of $(23.6) million, $31.1 million, after taxes, for the
three months ended June 30, 2008 and 2007, respectively, and $(101.2) million
and $(38.6) million, after taxes, for the nine months ended June 30, 2008 and
2007, respectively. Also included in Net (loss) income in the table above are
realized gains and (losses) of $13.7 million, $1.1 million, after taxes, for the
three months ended June 30, 2008 and 2007, respectively, and $15.9 million and
$(0.7) million, after taxes, for the nine months ended June 30, 2008 and 2007,
respectively, which are related to derivative instruments that have settled and
are designed to economically hedge natural gas that is still in storage
inventory.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Included
in Net (loss) income above are unrealized gains (losses) in the Retail and Other
segment of $6.4 million, $(1.9) million, after taxes, for the three months ended
June 30, 2008 and 2007, respectively, and $10.2 million and $(1.6) million,
after taxes, for the nine months ended June 30, 2008 and 2007,
respectively.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Natural
Gas Distribution Segment</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Natural
Gas Distribution operations have been managed with the goal of growing
profitably through several key initiatives including:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">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 in its natural gas
      distribution system, as well as recovery of all prudently incurred costs
      in order to provide safe and reliable service throughout NJNG&#8217;s service
      territory.</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#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">Based
      upon increases in NJNG&#8217;s operation, 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.</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#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">On
      July 30, 2008, NJNG and&#160;the Department of Public Advocate, Division
      of Rate Counsel (Rate Counsel) signed an agreement that stipulated the
      principal financial terms of a settlement of its petitioned rate increase.
      Pending final review and approval by the BPU, NJNG would receive a revenue
      increase to its base rates of approximately $32.5 million, which is
      inclusive of an approximate $13 million impact of a change to the
      conservation incentive program baseline usage rate, receive an allowed
      return on equity component of 10.3 percent, reduce its depreciation
      expense component from 3.0 percent to 2.34 percent, and reduce its
      depreciation expense by $1.6 million annually as a result of the
      amortization of previously recovered asset retirement obligations, all of
      which are expected to commence on or about October 1, 2008.</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#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">As
      a result of the signed stipulation, NJNG recorded an aggregate after-tax
      charge in the third quarter of fiscal 2008 of approximately $1.5 million,
      as it determined that certain regulatory assets were no longer recoverable
      in future rates from customers (approximately $769,000) and changed its
      computation for its allowance for funds used during construction
      (approximately $744,000).</font></div>
            </td>
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      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
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            <td 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 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">Working
      with the BPU and 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>
      </table>
    </div>
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24</font></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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">Managing
      its new customer growth rate, which is expected to be approximately 1.6
      percent for fiscal 2008;</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 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 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">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 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 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">Managing
      the volatility of wholesale natural gas prices through a hedging program
      designed to keep customers&#8217; Basic Gas Supply Service (BGSS) rates as
      stable as possible.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 BGSS-related savings achieved. An annual review of the CIP
must be filed in June 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
utility gross margin amounts.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
conjunction with the CIP, NJNG is required to administer programs that promote
customer conservation efforts. As of June 30, 2008 and September 30, 2007, the
obligation to fund these conservation programs was recorded at its present value
of $914,000 and $1.4 million, respectively, on the Unaudited Condensed
Consolidated Balance Sheets.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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. Through June 30, 2008, NJNG has recovered $6.7
million of these previously deferred amounts.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Energy
Services Segment</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 of the United
States and Canada.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">NJRES
incorporates the following elements to provide for growth, while focusing on
maintaining a low-risk operating and counterparty credit profile:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">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>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div><br></div>
    <div>
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          </div>
        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
25</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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">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 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 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">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 financial 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 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 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">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 natural gas at a later date to return 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
conducting its business, NJRES mitigates risk by following formal risk
management guidelines, including transaction 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 its credit exposures with its </font></div>
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          <div style="WIDTH: 100%" align="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
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            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
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      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">various
counterparties. The Risk Management Committee (RMC) of NJR oversees compliance
with these established guidelines.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Retail
and Other Segment</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
are natural gas transportation and storage facilities. NJR believes that
acquiring, owning and developing these mid-stream assets, which operate under a
tariff structure that have either a regulated or market-based rate can provide a
significant growth opportunity for the Company. To that end, NJR has acquired an
interest in Iroquois (regulated rate) and Steckman Ridge (anticipated
market-based rate), 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 148,000
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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On June
5, 2008, the Federal Energy Regulatory Commission (FERC) issued Steckman Ridge a
certificate of public convenience and necessity authorizing the ownership,
construction and operation of its natural gas storage facility and associated
facilities. It is anticipated that construction on Steckman Ridge will be
completed during the first quarter of fiscal 2010. As of June 30, 2008, NJR has
invested $71.6 million in Steckman Ridge. This amount excludes capitalized
interest and other direct costs. Total project costs related to the development
of the storage facility have been revised from the original estimate of
approximately $250 million to approximately $265 million, of which NJR is
obligated to fund 50 percent, or approximately $132.5 million. NJR anticipates
that Steckman Ridge will be able to secure non-recourse financing upon
completion of the construction and development of its facilities, thereby
potentially reducing the final expected recourse 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Critical
Accounting Policies</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Derivative
Instruments</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Derivative
activities are recorded in accordance with SFAS No. 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
Unaudited Condensed Consolidated Statements of Income.&#160;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
providing its unregulated wholesale energy services, NJRES 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 settlement accounting. </font></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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
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          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
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              <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">&#160;<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 style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
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      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 and throughout the term of the contract 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 Unaudited Condensed Consolidated Balance Sheet, with changes in fair value
being recorded as a component of Gas purchases in the Unaudited Condensed
Consolidated Statements of Income.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Capitalized
Financing Costs</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG
capitalizes an allowance for funds used during construction (AFUDC), as a
component of Utility plant in the Unaudited 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 Unaudited 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 style="DISPLAY: inline; FONT-STYLE: italic">&#160;</font>If there is any change
in this recovery amount, NJNG would record a charge for the unrecovered portion
on its Unaudited Condensed Consolidated Income Statement.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
discussed in <font style="DISPLAY: inline; FONT-STYLE: italic">Note 2.</font>
<font style="DISPLAY: inline; FONT-STYLE: italic">Regulation &#8211; Filed Base Rate
Case and Signed Stipulation </font>in the Unaudited Condensed Consolidated
Financial Statements, as part of the agreement that stipulates the terms of a
settlement of NJNG&#8217;s petitioned rate increase, NJNG agreed to change its
computation of AFUDC for fiscal year 2008. As a result of this agreement, NJNG
recorded a post-tax aggregate charge of approximately $744,000 in the third
quarter of fiscal 2008. This charge represents the aggregate adjustment of
previously recorded equity component amounts under its AFUDC calculation and
recording deferred interest costs as its sole component of AFUDC through June
30, 2008 as a result of the disallowance of the equity component. NJNG
anticipates that, as rates are approved by the BPU as outlined in the
stipulation agreement, that its AFUDC calculation, effective October 1, 2008,
would include both a debt component and an equity component. The equity
component portion of the calculation would be based on an allowed fixed equity
rate, applicable only during periods when its short-term debt balances are lower
than its construction work-in-progress balances.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Recently
Issued Accounting Standards</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Refer to
<font style="DISPLAY: inline; FONT-STYLE: italic">Note 1. General</font> in the
Unaudited Condensed Consolidated Financial Statements, for discussion of
recently issued accounting standards.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Results
of Operations</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Consolidated</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net loss
for the quarter ended June 30, 2008 was $(7.6) million, compared with net income
of $25.4 million for the same period last fiscal year. Basic and diluted
earnings per share (EPS) decreased to a loss per share of $(0.18), compared with
earnings per share of $0.60 for the same period last fiscal year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
income for the nine months ended June 30, 2008, decreased 44.0 percent to $35.1
million, compared with $62.8 million for the same period last fiscal year. Basic
EPS decreased 44.0 percent to $0.84, compared with $1.50 for the same period
last fiscal year, and diluted EPS decreased 43.6 percent to $0.84, compared with
$1.49 for the same period last fiscal year.</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">
          </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
period basic and diluted earnings per share noted above have been retroactively
adjusted to reflect NJR&#8217;s 3 for 2 stock split distributed on March 3,
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
decrease in earnings for the three months ended June 30, 2008, as compared with
the same period in the prior fiscal year, was due primarily to increased gas
purchases costs at NJRES, primarily driven by unrealized losses in its financial
and physical contracts, offset by unrealized gains at NJREC, lower aggregate
interest costs, and a tax benefit associated with a state tax rate change at
NJRES. For the nine months ended June 30, 2008, the decrease in earnings as
compared with the same period in the prior fiscal year was due primarily to the
same factors noted above.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company&#8217;s Operating revenues and Gas purchases are as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="16%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="6" valign="bottom" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="6" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="16%" 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-STYLE: italic; FONT-FAMILY: times new roman">($
      in Thousands)</font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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: -17pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td colspan="2" valign="top" width="9%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -1.4pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -1.4pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Change</font></div>
            </td>
            <td colspan="2" valign="bottom" width="11%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </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">2007</font></div>
            </td>
            <td colspan="2" valign="top" width="7%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -1.4pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -17pt; MARGIN-RIGHT: -1.4pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Change</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td 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">Operating
      revenues</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$1,000,439</font></div>
            </td>
            <td valign="top" width="2%"><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">$662,218</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="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">51.1</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 9.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 8pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,989,122</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="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,428,662</font></div>
            </td>
            <td valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">23.1</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 9.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="16%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Gas
      purchases</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;945,629</font></div>
            </td>
            <td valign="top" width="2%" style="BORDER-BOTTOM: black 1pt 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 1pt 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">$554,917</font></div>
            </td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" width="5%" style="BORDER-BOTTOM: black 1pt 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">70.4</font></div>
            </td>
            <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 9.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,696,248</font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: -9pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,099,898</font></div>
            </td>
            <td valign="top" width="1%" style="BORDER-BOTTOM: black 1pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" width="5%" style="BORDER-BOTTOM: black 1pt 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">28.4</font></div>
            </td>
            <td align="left" valign="bottom" width="3%" style="BORDER-BOTTOM: black 1pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 9.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operating
revenues increased $338.2 million during the three months ended June 30, 2008,
compared with the same period of the prior fiscal year due primarily to an
increase in transaction volume at NJRES, as well as moderate increases in
customer growth and greater off-system sales, partially offset by reduced
customer usage at NJNG. For the nine months ended June 30, 2008, Operating
revenues increased $560.5 million compared with the same period of the prior
fiscal year due primarily to the same factors that were noted
above.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
factors that resulted in the increase in revenues described above similarly
affected an increase of $391.0 million and $596.4 million in Gas purchases for
the three and nine months ended June 30, 2008, respectively, as compared with
the same periods in the prior fiscal year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Natural
Gas Distribution Operations</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG is a
local natural gas distribution company that provides regulated retail energy
services to approximately 483,000 residential and commercial customers in
central and northern New Jersey and participates in the off-system sales and
capacity release markets.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">NJNG&#8217;s
financial results are as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%"><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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
            </td>
            <td colspan="4" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%" 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: 9pt; FONT-STYLE: italic; FONT-FAMILY: times new roman, times new roman, serif">(Thousands)</font></div>
            </td>
            <td 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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2008</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="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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2007</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="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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2008</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 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="center"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">2007</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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Utility
      Gross Margin</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="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>
            <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="top" 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="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      revenues</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$179,511</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$180,980</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$940,689</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$871,198</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 valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Less:</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="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>
            <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>
            <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>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">125,060</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">124,867</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">653,196</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">588,723</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 valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Energy
      and other taxes</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9,031</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">9,899</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">53,137</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">51,197</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 valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Regulatory
      rider expense</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5,925</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">6,226</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">35,879</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">33,827</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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      Utility Gross Margin</font></div>
            </td>
            <td align="right" valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;39,495</font></div>
            </td>
            <td valign="bottom" width="1%" 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="top" width="9%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;39,988</font></div>
            </td>
            <td valign="bottom" width="1%" 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="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$198,477</font></div>
            </td>
            <td valign="bottom" width="1%" 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="top" width="9%" style="BORDER-BOTTOM: black 1.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$197,451</font></div>
            </td>
            <td valign="top" width="1%" 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="#cceeff">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Utility
      Gross Margin</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="bottom" 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>
            <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>
            <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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Residential
      and commercial</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;33,535</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$
      33,405</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$178,145</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$176,619</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 valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Transportation</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,639</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,159</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">15,438</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">13,906</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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      Utility Firm Gross Margin</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">38,174</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">37,564</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">193,583</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>
            <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: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">190,525</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>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Incentive
      programs</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,225</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2,242</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,836</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">6,426</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 valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 16pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Interruptible</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">96</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">182</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">358</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">500</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 valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">BPU
      settlement (included in Gas purchases above)</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(300</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</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: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">&#8212;</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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      Utility Gross Margin</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">39,495</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">39,988</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">198,477</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">197,451</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>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Operation
      and maintenance expense</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">21,637</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">22,716</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">69,417</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">65,663</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 valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">9,488</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">8,940</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">28,053</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">26,526</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 valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      taxes not reflected in utility gross margin</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">818</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">770</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,642</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2,248</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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Operating
      Income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;7,552</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;7,562</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.5pt solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;98,365</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$103,014</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>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Other
      income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(41</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-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">)</font></div>
            </td>
            <td align="right" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">772</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,641</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">2,657</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 valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Interest
      expense, 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,146</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">4,700</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">15,641</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">15,337</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 valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Income
      tax provision</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,218</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,032</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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">34,378</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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">34,598</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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%" 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: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Net
      Income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;147</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="top" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;&#160;&#160;2,602</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;50,987</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="top" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.5pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">$&#160;&#160;55,736</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Utility
Gross Margin</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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, and may not be comparable to the definition of gross
margin used by others in the natural gas distribution business and other
industries. Utility gross margin is comprised of three major categories which
include utility firm gross margin, incentive programs and utility gross margin
from interruptible customers. 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.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TEFA,
which is included in Energy and other taxes on the Unaudited 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG&#8217;s
Operating revenues decreased by $1.5 million, or 0.8 percent, and Gas purchases
increased by $193,000, or 0.2 percent, for the three months ended June 30, 2008,
respectively, compared with same period in the prior fiscal year as a result
of:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      decrease for both Operating revenue and Gas purchases related to firm
      sales in the amount of $12.4 million, which was the result of lower
      volumes and a decrease in the average BGSS rate to $0.975 per therm in the
      third quarter of fiscal 2008 as compared with $1.0256 per therm in the
      third quarter of fiscal 2007;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">offset
      by an increase in Operating revenue and Gas purchases related to
      off-system sales in the amount of $7.5 million and $7.4 million,
      respectively, as a result of increased sales prices of 45 percent to
      $11.845 per dekatherm (dth) for the three months ending June 30, 2008 as
      compared to $8.167 per dth for the three months ending June 30, 2007 as a
      result of the change in the wholesale price of natural
  gas;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Operating revenue and Gas purchases related to storage
      incentive revenue in the amount of $1.5 million and $2.4 million,
      respectively, as a result of opportunities available in the wholesale
      energy market; 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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in both Operating revenue and Gas purchases related to
      interruptible sales in the amount of $1.3 million, due to an increase in
      sales to electric co-generation
customers.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG&#8217;s
Operating revenues increased by $69.5 million, or 8.0 percent, and Gas purchases
increased by $64.5 million, or 11.0 percent, respectively, for the nine months
ended June 30, 2008, compared with the same period in the prior fiscal year,
primarily as a result of:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Operating revenue and Gas purchases related to off-system
      sales in the amount of $46.3 million and $44.6 million, respectively, as a
      result of the change in the wholesale price of natural
  gas;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      reduction in BGSS customer refunds provided to residential and small
      commercial customers of $44.3 million, inclusive of sales tax refunds of
      $2.9 million. For the nine months ended June 30, 2008 BGSS customer
      refunds were $32.1 million, as compared to the same period in the prior
      fiscal year of $76.4 million. These customer refunds were the result of
      anticipated reductions in cost to acquire wholesale natural gas, as
      compared to the current established rate included in NJNG&#8217;s BGSS
      tariff;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase of $5.0 million in Operating revenue due an increase of the
      amounts accrued through the CIP program as a result of lower customer
      usage, as described below;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Operating revenue and Gas purchases related to interruptible
      sales in the amount of $3.9 million and $3.6 million, respectively, due to
      an increase in sales to electric co-generation
  customers;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Operating revenue and Gas purchases related to storage
      incentive revenue in the amount of $1.5 million and $3.8 million,
      respectively, as a result of opportunities available in the wholesale
      energy market;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Gas purchases of $300,000 as a result of a non-recurring
      charge to the BGSS associated with a settlement agreement related to a
      BGSS filing for fiscal 2007;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Gas purchases of $1.0 million related to decreased amounts
      received through capacity release and FRM of $559,000 in fiscal 2008 as
      compared to $1.6 million in fiscal 2007; partially offset
    by</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="right" valign="top" width="5%">
              <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      decrease in firm sales of $31.4 million for both Operating revenue and Gas
      purchases as a result of a decrease in therms sold as well as the average
      BGSS price per therm.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sales tax
and TEFA, which are presented as both components of Revenues and Operating
Expenses in the Unaudited Condensed Consolidated Statements of Income, totaled
$9.0 million and $9.9 million and $53.1 million and $51.2 million for the three
and nine months ended, June 30, 2008 and 2007, respectively. For the three
months ended June 30, 2008, sales tax and TEFA decreased due primarily to a
decrease in customer usage. For the nine months ended June 30, 2008, sales tax
increased as a result of the increase in Operating revenue, as compared to the
same period in the prior fiscal year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Regulatory
rider expenses totaled $5.9 million and $6.2 million and $35.9 million and $33.8
million for the three and nine months ended June 30, 2008 and 2007,
respectively. As Regulatory rider expenses are calculated on a per-therm basis,
the decrease in Regulatory rider expenses for the three months ended June 30,
2008 compared with the same period in the prior fiscal year is a result of a
decrease in sales offset by an increase in the rider rate charged to customers.
The increase in Regulatory rider expenses for the nine months ended June 30,
2008 over the same period in the prior fiscal year is a result of an increase in
the rider rate charged offset by a decrease in therms sold to customers as a
result of reduced usage.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Utility
Firm Gross Margin</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Utility
firm gross margin is earned from residential and commercial customers who
receive natural gas service from NJNG through either sales or transportation
tariffs.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
utility firm gross margin increased $610,000, or 1.6 percent, for the three
months, and $3.1 million, or 1.6 percent, for the nine months ended, June 30,
2008, compared with the same periods in the prior fiscal year. The changes were
due primarily to an increase in firm and transport customers of 3,800 and 2,000,
respectively over the same period in the prior fiscal year. Gross margin
associated with firm customers increased $130,000 and $1.5 million for the three
and nine months ended June 30, 2008, respectively, as compared to the same
period in the prior fiscal year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross
margin associated with transportation customers increased $480,000, or 11.5
percent, for the three months ended June 30, 2008, and $1.5 million or 11.0
percent for the nine months ended June 30, 2008, respectively, compared with the
same periods in the prior fiscal year. NJNG transported 1.4 Bcf and 1.5 Bcf for
the three months ended June 30, 2008 and 2007, respectively, and 8.0 Bcf and 7.8
Bcf for the nine months ended June 30, 2008 and 2007, respectively. The increase
in utility firm gross margin was due primarily to an increase of 2,000
transportation customers over the same period in the prior fiscal
year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
weather for the three months ended June 30, 2008 was 15.6 percent warmer than
normal, which resulted in an accrual of utility gross margin under the CIP of
$1.7 million, compared with 15.1 percent warmer than normal weather for the same
period last fiscal year, which resulted in a reduction of the accrual of utility
gross margin under the CIP of $225,000. The weather for the nine months ended
June 30, 2008 was 8.3 percent warmer than normal, </font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">which
resulted in an accrual of utility gross margin under the CIP of $9.1 million,
compared with 1.6 percent warmer than normal weather for the same period last
fiscal year, which resulted in an accrual of utility gross margin of $8.2
million. Under the provisions of the CIP, accruals related to the weather
portion are dependent on the occurrence of degree days and the magnitude of the
variance in relation to the normal degree day.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Customer
usage was lower than the established benchmark during the nine months ended June
30, 2008, which resulted in an additional accrual of utility gross margin under
the CIP of $11.5 million compared with $7.4 million for the same period in
fiscal 2007.NJNG had 10,697 and 9,197 residential customers and 5,179 and 4,637
commercial customers using its transportation service at June 30, 2008 and 2007,
respectively. The increase in transportation customers 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG
added 4,896 and 5,645 new customers during the nine months ended June 30, 2008
and 2007, respectively. In addition, NJNG converted 505 and 357 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 0.67 Bcf in sales to firm customers, assuming
normal weather and usage.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Incentive
Programs</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 economically
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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 established with the purchase of a portfolio of futures contracts
applicable to the April-through-October injection season, which is established
by the BPU.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG&#8217;s
incentive programs totaled 5.6 Bcf and generated $1.2 million of utility gross
margin for the three months ended June 30, 2008, compared with 6.6 Bcf and $2.2
million of utility gross margin in the same period in the prior fiscal year. For
the three month period ended June 30, 2008, the decrease is due primarily to the
decrease in margin associated with the storage program as a result of timing
variations of storage incentive transactions.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG&#8217;s
incentive programs totaled 26.8 Bcf and generated $4.8 million of utility gross
margin for the nine months ended June 30, 2008, compared with 26.9 Bcf and $6.4
million of utility gross margin, for the same period in the prior fiscal year.
For the nine month period ended June 30, 2008, the decrease in incentive program
was due primarily to:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">a
      decrease in margin from the storage incentive program as a result of
      timing variations of storage incentive transactions; 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 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 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">more
      favorable market spreads, which resulted in an increase in off-system
      sales margin.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New York
Mercantile Exchange (NYMEX) settlement prices for natural gas are a general
indication of the monthly market movements. NYMEX prices have increased to an
average of $8.641/dth for the nine months ended June 30, 2008 from $6.959/dth
for the nine months ended June 30, 2007, which represents a 24.2 percent
increase, while the average off-system price was higher by 29.1 percent at an
average of $10.050/dth for the nine months ended June 30, 2008 from an average
of $7.786/dth for the nine months ended June 30, 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Interruptible
and Tariff Revenues</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008, NJNG serves 46 customers through interruptible sales and/or
transportation tariffs. Interruptible customers are those customers whose
service can be temporarily halted as they have the ability to utilize an
alternate fuel source. Although therms sold and transported to interruptible
customers represented 5 percent of total throughput for the nine months ended
June 30, 2008, and 4 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 as a result of the natural gas commodity cost being the
largest component of the sales price.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interruptible
sales were 1.7 Bcf and 1.1 Bcf for the nine months ended June 30, 2008, and
2007, respectively. In addition, NJNG transported 2.5 Bcf and 2.3 Bcf for the
nine months ended June 30, 2008 and 2007, respectively, for its interruptible
customers.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Operation
and Maintenance Expense</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operation
and maintenance (O&amp;M) expense decreased $1.1 million, or 4.7 percent, for
the three months ended June 30, 2008, compared with the same period in the prior
fiscal year. The decrease was due primarily to:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      $1.4 million credit as a result of adjusting accrued medical premium
      expenses to reflect lower costs based on actual claims;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">lower
      pipeline integrity costs of $722,000; partially offset
  by</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">higher
      compensation costs of $920,000 as a result of an increase in the number of
      employees and overtime labor as well as annual wage
    increases.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operation
and maintenance expense increased $3.8 million, or 5.7 percent, for the nine
months ended June 30, 2008, compared with the same period in the prior fiscal
year. The increase was due primarily to:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: wingdings">&#376;</font></div>
            </td>
            <td 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">higher
      compensation costs of $4.2 million as a result of an increase in the
      number of employees and overtime labor as well as annual wage
      increases;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in materials and supplies expense of $560,000 due primarily to an
      increase in high pressure meter relocations and a greater number of meter
      exchanges on non-standard residential meters;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase of $1.1 million due primarily to an increase in NJNG&#8217;s shared
      services expenses, including labor costs and consulting fees related to
      various tax positions; partially offset by</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      $1.4 million credit as a result of adjusting accrued medical premium
      expenses to reflect lower costs based on actual claims;
  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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">lower
      pipeline integrity costs of
$885,000.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Operating
Income</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operating
income remained constant at $7.6 million for the three months ended June 30,
2008, compared with the same period in the prior fiscal year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operating
income decreased $4.6 million, or 4.5 percent, for the nine months ended June
30, 2008, compared with the same period in the prior fiscal year. The decrease
was due primarily to:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Operation and maintenance expenses of $3.8 million, as
      discussed above;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in Depreciation expense of $1.5 million, as a result of greater
      utility plant being placed into service; partially offset
    by</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase in total Utility gross margin of $1.0 million, as discussed
      above.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Interest
Expense</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
expense decreased $554,000 for the three months ended June 30, 2008, as compared
to the same period in the prior fiscal year, due primarily to:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      decrease of $757,000 due to a lower average interest rate of 2.3 percent
      on commercial paper borrowings as compared with 5.3 percent and lower
      short-term borrowings;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      decrease in BGSS interest of $714,000, as a result of no overrecovered gas
      costs;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      decrease of $220,000, which includes a year to date adjustment of $429,000
      related to a change in the calculation of AFUDC (see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 2.</font> <font style="DISPLAY: inline; FONT-STYLE: italic">Regulation </font>in the
      Unaudited Condensed Consolidated Financial Statements &#8211; Filed Base Rate
      Case and Signed Stipulation); partially offset by</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase of $278,000 in interest related to NJNG&#8217;s variable rate debt,
      which is correlated to the auction rate securities issued by the Economic
      Development Authority of New Jersey (EDA), as a result of higher interest
      rates due primarily to reduced liquidity in the credit markets along with
      maximum rates being set for the auction rate securities that
      failed;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase of $928,000 for interest on fixed rate borrowings mostly related
      to NJNG&#8217;s issuance of the $125 million notes due May 2018 which carry an
      interest rate of 5.6 percent.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
expense increased $304,000 for the nine months ended June 30, 2008, as compared
to the same period in the prior fiscal year, due primarily to:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase of $1.0 million for interest on fixed rate borrowings mostly
      related to NJNG&#8217;s issuance of the $125 million senior notes due May 2018,
      as described above;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase of $679,000 in interest related to NJNG&#8217;s variable rate debt, as
      a result of higher interest rates as described above;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">an
      increase of $187,000 associated with lower amounts of capitalized
      interest, based on lower short-term borrowing costs; partially offset
      by</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      decrease of $1.1 million driven by a lower average interest rate of 3.6
      percent on NJNG&#8217;s commercial paper borrowings compared to 5.3 percent in
      the prior year;</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="75%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <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: wingdings">&#376;</font></div>
            </td>
            <td 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">a
      decrease in BGSS interest of $560,000, due to the absence of overrecovered
      gas costs from customers as a result of wholesale commodity prices for
      natural gas being in excess of allowed amounts included in
      rates.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Net
Income</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
income decreased $2.5 million, or 94.4 percent for the three months ended June
30, 2008 as compared with the same period in the prior fiscal year, due
primarily to a one-time net after-tax charge of $0.98 million to correct a tax
position surrounding utility property and approximately $1.5 million in
after-tax charges related to the signed agreement surrounding the stipulation of
NJNG&#8217;s base rate case filing as discussed in <font style="DISPLAY: inline; FONT-STYLE: italic">Note 2.</font> <font style="DISPLAY: inline; FONT-STYLE: italic">Regulation &#8211; Filed Base Rate Case
and Signed Stipulation </font>in the Unaudited Condensed Consolidated Financial
Statements. Of this $1.5 million after-tax charge, approximately $0.7 million
represents an aggregate change in the computation of AFUDC and $0.8 million
represents the estimated non-recovery of previously deferred costs.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
income decreased $4.8 million, or 8.5 percent, for the nine months ended June
30, 2008, as compared with the same period in the prior fiscal year, due
primarily to a decrease in Operating income of approximately $4.6 million as
discussed above, partially offset by lower income tax expense of $0.8 million as
a result of the lower Operating income, offset by the one-time charge related to
the correction of a tax position as noted above.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Energy
Services Operations</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 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 establish economic hedges that fix and protect the cash
flows surrounding these transactions.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 not to use the normal purchase normal sale scope exception of SFAS 133,
and records these physical commodity contracts at fair value on the Unaudited
Condensed Consolidated Balance Sheets. All changes in the fair value of physical
commodity contracts entered into subsequent to September 30, 2007 are recorded
as part of Gas purchases in the Unaudited Condensed Consolidated Statements of
Income.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
changes in fair value of NJRES&#8217; financial instruments, which are financial
futures, options, and swap contracts, are recognized in the Unaudited Condensed
Consolidated Statements of Income, as a component of Gas purchases.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 Gas
purchases in the Unaudited Condensed Consolidated Statements of Income 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 </font></div>
    <div><br></div>
    <div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">placed
into storage, to be sold at a later date, settle and result in realized gains,
which are also recorded as a component of Gas purchases in the Unaudited
Condensed Consolidated Statements of Income.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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. These are normally varying over one to five years.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES&#8217;
financial results are summarized as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="34%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="bottom" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="4" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: 8.25pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td valign="top" 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="top" width="8%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.35pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td valign="top" 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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</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>
          </tr>
          <tr bgcolor="white">
            <td 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">Operating
      revenues</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$801,628</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="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">$476,383</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,009,751</font></div>
            </td>
            <td valign="top" width="2%"><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">$1,540,558</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 valign="top" 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">Gas
      purchases</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">820,568</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="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">430,050</font></div>
            </td>
            <td valign="top" 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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,043,051</font></div>
            </td>
            <td valign="top" 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="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">1,511,175</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>
          </tr>
          <tr bgcolor="white">
            <td 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">Gross
      (loss) margin</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(18,940</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">46,333</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(33,300</font></div>
            </td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">29,383</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 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">Operation
      and maintenance expense</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6,811</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="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">5,967</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">14,677</font></div>
            </td>
            <td valign="top" width="2%"><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">13,120</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 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">Depreciation
      and amortization</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">50</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="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">53</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">156</font></div>
            </td>
            <td valign="top" width="2%"><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">161</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 valign="top" 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">Other
      taxes</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">151</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="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">155</font></div>
            </td>
            <td valign="top" 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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">559</font></div>
            </td>
            <td valign="top" 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="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">515</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>
          </tr>
          <tr bgcolor="white">
            <td 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">Operating
      (loss) income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(25,952</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">40,158</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(48,692</font></div>
            </td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">15,587</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 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">Other
      income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">92</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="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">228</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">244</font></div>
            </td>
            <td valign="top" width="2%"><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">343</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 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">Interest
      expense, net</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">738</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="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">256</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,502</font></div>
            </td>
            <td valign="top" width="2%"><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">3,283</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 valign="top" width="34%" 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">Income
      tax benefit</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(11,052</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" 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">16,866</font></div>
            </td>
            <td valign="top" width="2%" 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="bottom" width="8%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(22,607</font></div>
            </td>
            <td align="left" valign="top" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">5,842</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="white">
            <td 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">Net
      (loss) income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(15,546</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$&#160;&#160;23,264</font></div>
            </td>
            <td valign="top" width="2%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;(28,343</font></div>
            </td>
            <td align="left" valign="top" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$&#160;&#160;&#160;&#160;&#160;&#160;&#160;6,805</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES
records its financial derivative instruments using fair market values. The
mark-to-market changes on these financial instruments are reflected as a
component of Gas purchases in the Unaudited Condensed Consolidated Income
Statement. As of June 30, 2008, NJRES&#8217; portfolio of financial derivatives
instruments totaled 72.4 Bcf of net short positions, with an average portfolio
price of $11.60 per dth. NJRES&#8217; portfolio at June 30, 2007 was also in a net
short position, which totaled 83.0 Bcf and had an average portfolio price of
$8.29 per dth. A portfolio of net short positions is subject to unrealized
losses during periods of rising market prices.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES had
a gross loss of $18.9 million and gross margin of $46.3 million for the three
months ended June 30, 2008 and 2007, respectively. The decrease in gross margin
of approximately 141 percent is due primarily to losses stemming from financial
derivatives that were impacted by higher commodity market prices for natural
gas. NJRES incurred realized gains of $22.4 million and unrealized losses of
$38.7 million in the current fiscal period, as compared to realized and
unrealized gains of $1.8 million and $53.5 million, respectively, in the prior
fiscal period. These gains and losses were incurred by NJRES' portfolio mix of
open financial derivative positions, which are utilized to provide an economic
hedge, in order to secure a fixed price on forecasted natural gas storage
injections and withdrawals. The average market price on these positions within
NJRES' portfolio increased by approximately 32 percent, from $10.06 per dth as
of March 31, 2008 to $13.30 per dth as of June 30, 2008, whereas during the same
period in the prior fiscal year the positions experienced price decreases of
approximately 9 percent.</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">
          </div>
        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES had
a gross loss of $33.3 million and gross margin of $29.4 million for the nine
months ended June 30, 2008 and 2007, respectively. The decrease in gross margin
of approximately 214 percent is due primarily to increasing market prices for
natural gas, which resulted in unrealized losses on its financial instruments.
The financial derivatives incurred aggregate realized gains of $26.1 million and
unrealized losses of $165.8 million, respectively, for the nine months ended
June 30, 2008 as compared to realized and unrealized losses of $1.2 million and
$64.4 million, respectively, in the prior fiscal period. The financial
derivatives that comprise NJRES' portfolios are designed to offset a majority of
the commodity price risk, by providing an economic hedge for forecasted physical
gas transactions. NJRES' current portfolio mix of net short financial
derivatives is subject to unrealized losses during periods of rising market
prices for natural gas. The average market price on the positions within NJRES'
portfolio increased by approximately 77 percent, from $7.52 per dth as of
September 30, 2007 to $13.30 per dth as of June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As part
of its lower net loss, NJRES&#8217; state income tax benefit decreased due to a
reduction in its effective state income tax, fully offset by revaluing its
beginning of the fiscal year deferred tax liabilities by the lower effective
state tax rate, which resulted in a benefit of approximately $1.7 million. The
reduction in the rate is due to a change in the apportionment of its taxable
income for state tax purposes. These changes and revaluation of deferred tax
liabilities resulted in an effective tax benefit of 44.3 percent for the nine
months ended June 30, 2008 as compared to an effective tax benefit of 41.1
percent for the nine months ended June 30, 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 from its storage inventory. 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
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          </div>
        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">The
following table is a computation of financial margin of NJRES:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="bottom" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="4" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: 4.3pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td valign="top" 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="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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: 4.3pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td valign="top" 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 valign="top" width="35%">
              <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">Operating
      revenues</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$801,628</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="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">$476,383</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,009,751</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">$1,540,558</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%">
              <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">Less:
      Gas purchases</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">820,568</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="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">430,050</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,043,051</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">1,511,175</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="35%">
              <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">Add:</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="2%"><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="top" width="2%"><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="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="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%">
              <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">Unrealized
      loss (gain) on derivative 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">38,714</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="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">(53,459</font></div>
            </td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">165,757</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">64,408</font></div>
            </td>
            <td valign="top" width="2%"><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="35%" style="BORDER-BOTTOM: black 0.5pt 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">Net
      realized (gain) loss from derivative instruments related to natural gas
      inventory</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(22,428</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">(1,802</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(26,057</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: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">1,158</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 valign="top" width="35%" 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">Financial
      margin</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;(2,654</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$&#160;&#160;(8,928</font></div>
            </td>
            <td align="left" valign="top" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;106,400</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>
            <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">$&#160;&#160;&#160;&#160;&#160;94,949</font></div>
            </td>
            <td valign="top" 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
reconciliation of Operating loss, the closest GAAP financial measurement, to the
Financial margin of NJRES&#160;is as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="bottom" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="4" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="35%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </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: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="35%">
              <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">Operating
      (loss) income</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(25,952</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$40,158</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(48,692</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$15,587</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%">
              <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">Add:</font></div>
            </td>
            <td align="right" 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>
            <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>
            <td align="right" 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="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="35%">
              <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">Operation
      and maintenance expense</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6,811</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="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">5,967</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">14,677</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="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">13,120</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%">
              <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">Depreciation
      and amortization</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">50</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="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">53</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="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">156</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="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">161</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="35%" 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">Other
      taxes</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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">151</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="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">155</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="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">559</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="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">515</font></div>
            </td>
            <td valign="top" 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 valign="top" width="35%">
              <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">Subtotal
      &#8211; Gross (loss) margin</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(18,940</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$46,333</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(33,300</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$29,383</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="35%">
              <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">Add:</font></div>
            </td>
            <td align="right" 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>
            <td align="right" 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>
            <td align="right" 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="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="35%">
              <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">Unrealized
      loss (gain) on derivative instruments</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">38,714</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="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">(53,459</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">165,757</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="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">64,408</font></div>
            </td>
            <td valign="top" width="2%"><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="35%" 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">Net
      realized (gain) loss from derivative instruments related to natural gas
      inventory</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(22,428</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" 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">(1,802</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(26,057</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">1,158</font></div>
            </td>
            <td valign="bottom" width="2%" 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 valign="top" width="35%" 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">Financial
      (loss) margin</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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;(2,654</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$
      (8,928</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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: -0.7pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$106,400</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="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">$94,949</font></div>
            </td>
            <td valign="top" 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">A
reconciliation of Net (loss) income to Net financial (loss) earnings is as
follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="4" valign="top" width="22%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="4" valign="bottom" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="35%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</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: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="35%">
              <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">Net
      (loss) income</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(15,546</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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">$
      23,264</font></div>
            </td>
            <td valign="top" width="2%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(28,343</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;6,805</font></div>
            </td>
            <td valign="top" 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="35%">
              <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">Add:</font></div>
            </td>
            <td align="right" 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>
            <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>
            <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="2%"><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="35%">
              <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">Unrealized
      loss (gain) on derivative instruments, net of 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">23,599</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="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">(31,117</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">101,222</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="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">38,597</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="35%" 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">Realized
      (gain) loss from derivative instruments related to natural gas inventory,
      net of taxes</font></div>
            </td>
            <td align="right" valign="bottom" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(13,683</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" 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">(1,062</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(15,900</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black 0.25pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" 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">682</font></div>
            </td>
            <td valign="bottom" width="2%" 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="white">
            <td align="left" valign="top" width="35%" 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">Net
      financial (loss) earnings</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;(5,630</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;(8,915</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;56,979</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="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">$46,084</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES had
a financial loss of $2.7 million and $8.9 million for the three months ended
June 30, 2008 and 2007, respectively. The $6.2 million reduction in net
financial losses compared with the prior fiscal period is due primarily to
improved margins of $8.9 million on natural gas storage transactions that
stemmed from warmer than normal weather in the Northeast market regions during
the current fiscal quarter. The warmer weather prompted market prices to
increase, resulting in more favorable storage spreads that averaged
approximately $0.173 per dth in the current fiscal period, as compared to $0.097
per dth in the prior fiscal period. Storage withdrawal volumes were also higher
during the current fiscal period, which decreased storage levels by 5.8 Bcf to
an ending balance of 20.8 </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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="78%" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">Bcf.
Additionally, NJRES experienced higher margins on its transport capacity serving
the Northeast market area during the month of June 2008, which had warmer than
normal temperatures in the region. These favorable margins were the result of
increased demand levels from electric cogeneration facilities, which were
purchasing higher volumes of natural gas, as a fuel source, in order to
accommodate their additional electric generation requirements during the month.
The reduction in net financial loss was partially offset by higher losses from
basis positions, which posted $3.5 million of additional losses in the current
fiscal period as compared to prior fiscal period. The higher losses from basis
positions were due primarily to increased demand costs of approximately $4.8
million over the prior fiscal period, that were associated with additional
transport capacity acquired during the&#160;first fiscal quarter, as well as,
fewer arbitrage opportunities due to overall market conditions within NJRES'
business regions.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES'
financial margin increased $11.4 million for the nine months ended June 30,
2008, compared with the same period last fiscal year. The increase in financial
margin was due primarily to the acquisition of additional transport contracts
for the Northeast market region during the first quarter of fiscal 2008. The
additional transport contracts enabled NJRES to transact greater volumes in the
market region, which experienced favorable spreads that contributed to higher
margins. The overall increase in financial margin was partially offset by lower
spreads on storage assets, which decreased in the current fiscal year as
compared to prior fiscal year, when during the month of February 2007, optimal
pricing conditions enabled NJRES to transact a significant volume of favorable
storage spreads that contributed to higher margins. The average spread on
storage positions decreased from $0.710 per dth in the prior fiscal year period
to $0.422 per dth in the current fiscal year period.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES'
Operation and maintenance expense increased by $844,000 and $1.6 million for the
three and nine months ended June 30, 2008, respectively, compared with the same
periods last fiscal year. The increases were due primarily to higher
compensation costs as a result of higher salary and accrued incentive costs and
increased accounting fees, support expenses and charitable
contributions.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Contributing
to greater net financial earnings is a reduction of $1.8 million in state income
tax expense as a result of a reduction in NJRES&#8217; effective state income tax
rate. The reduction in the rate is due to a change in the apportionment of its
taxable income for state tax purposes. The new rate also resulted in a one time
current period benefit of approximately $1.7 million from the effect of
revaluing its deferred tax liabilities at the beginning of the fiscal year. As a
result of this state income tax rate change and the revaluation of its deferred
tax liabilities, NJRES had an effective rate of 37.8 percent for the nine months
ended June 30, 2008 compared with 41.1 percent for the nine months ended June
30, 2007. Excluding the $1.7 million one-time benefit, the effective tax rate
was 38.9 percent.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Retail
and Other Operations</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
consolidated financial results of Retail and Other are summarized as
follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%"><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: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Three
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="4" valign="top" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Nine
      Months Ended</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.65pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="38%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td colspan="2" valign="bottom" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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: 3pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td colspan="2" valign="top" width="10%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
            <td colspan="2" valign="top" width="9%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%">
              <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">Operating
      revenues</font></div>
            </td>
            <td align="right" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$19,344</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" 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">$4,926</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="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$38,834</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" 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">$17,117</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Operation
      and maintenance expense</font></div>
            </td>
            <td align="right" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;5,892</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" 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">$5,286</font></div>
            </td>
            <td valign="top" width="3%"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$17,030</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" 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">$15,839</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="38%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Equity
      in earnings, net of tax</font></div>
            </td>
            <td align="right" valign="top" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;378</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" 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">$&#160;&#160;&#160;407</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;1,548</font></div>
            </td>
            <td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" 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">$&#160;&#160;1,302</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="38%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Net
      income (loss)</font></div>
            </td>
            <td align="right" valign="top" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;7,802</font></div>
            </td>
            <td align="left" valign="top" 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="top" 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">$&#160;&#160;(489</font></div>
            </td>
            <td align="left" valign="middle" width="3%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="top" 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$12,479</font></div>
            </td>
            <td valign="top" width="3%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="top" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;231</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 </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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">derivative
financial instruments (futures contracts) designed to economically hedge the
long-term fixed-price contract.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
results of operations include unrealized gains (losses) associated with these
derivative instruments of $10.9 million and $(3.1) million, for the three months
ended June 30, 2008 and 2007, respectively, which are recorded, pre-tax, as a
component of Operating revenues. On an after-tax basis, these unrealized gains
(losses) are $6.4 million and $(1.9) million for the three months ended June 30,
2008 and 2007, respectively.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For the
nine month period, unrealized gains (losses) associated with these derivative
instruments are $17.4 million and $(2.8) million, for June 30, 2008 and 2007,
respectively. On an after-tax basis, these unrealized gains (losses) are $10.2
million and $(1.6) million for the nine months ended June 30, 2008 and 2007,
respectively.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operating
revenue for the three months and nine months ended June 30, 2008, increased
$14.4 million and $21.7 million, respectively as compared to last fiscal year,
due primarily to greater unrealized gains at NJR Energy, which were the result
of an increase in average market prices, partially offset by partial settlement
of these swap contracts. The portfolio of swaps is comprised primarily of long
positions, which increase in value during periods of rising market
prices.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operation
and maintenance expenses for the three months and the nine months ended June 30,
2008, increased $606,000 and $1.2 million, respectively compared with last
fiscal year due primarily to due to higher compensation costs resulting from an
increase in the number of employees as well as annual wage
increases.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Taxes
netted in Equity in earnings from Iroquois are $264,000 and $270,000 and are
included in the Unaudited Condensed Consolidated Statements of Income for the
three months ended June 30, 2008 and 2007, respectively. For the nine months
ended June 30, 2008 and 2007 taxes netted in Equity in earnings from Iroquois
are $1.0 million and $863,000, respectively and are included in the Unaudited
Condensed Consolidated Statements of Income. 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
income for the three months and nine months ended June 30, 2008, increased $8.3
million and $12.2 million, respectively compared with the same periods in fiscal
2007 due primarily to the increased operating revenue at NJR Energy, as
previously discussed and increased earnings from the investment in
Iroquois.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Liquidity
and Capital Resources</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJR&#8217;s
consolidated capital structure was as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="51%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 1.3pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">September
      30,</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="51%" 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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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">2007</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="51%">
              <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">Common
      stock equity</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">51</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</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">50</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">%</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="51%">
              <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">Long-term
      debt</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">38</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="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">30</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 valign="top" width="51%" 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">Short-term
      debt</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">11</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">20</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 valign="top" width="51%" 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">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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">100</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</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">100</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">%</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-STYLE: italic; FONT-FAMILY: Times New Roman">Common
stock equity</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
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          <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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
January 23, 2008, NJR&#8217;s Board of Directors approved a 3 for 2 stock split in the
form of a dividend for the Company&#8217;s common stock shareholders of record on
February 8, 2008. The additional shares were issued on March 3, 2008 resulting
in an increase in average shares outstanding from approximately 28 million to
approximately 42 million.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company has a share repurchase program that provides for the repurchase of up to
6.8 million shares on a split adjusted basis. As of June 30, 2008, the Company
repurchased approximately 5.4 million of those shares and has the ability to
repurchase an additional 1.4 million shares under the approved
program.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Debt</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008, NJR, NJRES and NJNG had committed credit facilities of $605
million with approximately $494.6 million available under these facilities (see
<font style="DISPLAY: inline; FONT-STYLE: italic">Note 6. Debt</font> in the
Unaudited Condensed Consolidated Financial Statements).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJR
believes that as of June 30, 2008, NJR, NJNG and NJRES were, and currently are,
in compliance with all debt covenants.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJR
believes that its existing borrowing availability and cash flow from operations
will be sufficient to satisfy its 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 and from the Company&#8217;s DRP.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">NJR</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
December 13, 2007, NJR refinanced its prior senior credit facility, which was
scheduled to expire on December 16, 2007, for a new $325 million, five-year,
revolving, unsecured credit facility. The new credit facility permits the
borrowing of revolving loans and swing loans, as well as the issuance of letters
of credit. Swing loans are loans made available on a same day basis for an
aggregate principal amount of up to $50 million and repayable in full within a
maximum of 7 days of borrowing. 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. Borrowings under the new 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 used the initial
borrowings under the new credit facility to refinance its prior credit facility
and pay all related fees and expenses. In addition, certain of NJR&#8217;s
non-regulated subsidiaries have guaranteed to the lenders all of NJR&#8217;s
obligations under the new credit facility.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 June 30, 2008,
NJR&#8217;s effective rate was 2.7 percent on outstanding borrowings of $109.9 million
under this credit facility.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
42</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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          </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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div>
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          <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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">NJNG</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 no commercial paper outstanding as of June 30, 2008 compared to
$175.7 million as of September 30, 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG has
a 3-year, $30 million uncommitted credit facility with a multinational financial
institution. As of June 30, 2008, NJNG had no borrowings outstanding under this
facility.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In May
2008, NJNG issued $125 million of 5.6 percent senior notes due May 15, 2018 in
the private placement market pursuant to a note purchase agreement. The notes
are secured until the release date (which is the date at which the security
provided by the pledge under NJNG&#8217;s mortgage indenture would no longer be
available to holders of any outstanding series of NJNG&#8217;s senior secured notes
and such indebtedness would become senior unsecured indebtedness) by an equal
amount of NJNG first mortgage bonds (Series LL), and interest is payable on the
Notes semi-annually. The proceeds from the notes were used to refinance or
retire short-term debt and will fund capital expenditure
requirements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG is
obligated with respect to loan agreements securing six series of variable rate
bonds totaling approximately $97.0 million of variable-rate debt backed by
securities issued by the New Jersey Economic Development Authority (EDA). The
EDA bonds are commonly referred to as auction rate securities (ARS) and have an
interest rate reset every 7 or 35 days, depending upon the applicable series,
when an auction is held for the purposes of determining the interest rate of the
securities. The interest rate associated with the NJNG variable-rate debt is
based on the rates on the EDA ARS. As of June 30, 2008, most of the auctions
surrounding the EDA ARS have failed, resulting in those bonds bearing interest
at their maximum rates, as defined in the EDA ARS, as the lesser of (i) 175
percent of 30-day LIBOR or (ii) 10 to 12 percent per annum, as applicable to
such series of ARS. As of June 30, 2008, the 30-day LIBOR rate was 2.5 percent.
While the failure of the ARS auctions does not signify or constitute a default
on NJNG, the EDA ARS does impact NJNG&#8217;s borrowing costs of the variable-rate
debt. As such, NJNG currently has a weighted average interest rate of 4.1
percent as of June 30, 2008, compared with a weighted average interest rate of
3.9 percent as of September 30, 2007. There can be no assurance that the EDA ARS
will have enough market liquidity to return interest rates below their maximum
rate.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Neither
NJNG nor its assets are obligated or pledged to support the NJR or NJRES
facilities.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">NJRES</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008 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 June 30, 2008.</font></div>
    <div><br></div>
    <div>
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43</font></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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
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            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 40pt; TEXT-INDENT: -40pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
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            </td>
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    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Contractual
Obligations</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 June 30,
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Payments&#160;Due&#160;by&#160;Period</font></div>
              </td>
              <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
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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">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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total</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>
              <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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Up&#160;to</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1&#160;Year</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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2-3</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Years</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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4-5</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Years</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="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">After</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">5
      Years</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 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">Long-term
      debt <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;732,750</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;&#160;&#160;77,620</font></div>
              </td>
              <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;61,627</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;39,908</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="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$553,595</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="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">Capital
      lease obligations <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">87,011</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">18,015</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">18,410</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,773</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 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">Operating
      leases</font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10,039</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,913</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,672</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,489</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">1,965</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="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">Short-term
      debt <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">109,900</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">109,900</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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 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">New
      Jersey Clean Energy Program <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,186</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,186</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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="#cceeff">
              <td 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">Construction
      obligations</font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,672</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2,672</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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="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">Obligations
      for uncertain tax positions <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(1)
      (2)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,130</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,130</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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="#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">Remediation
      expenditures <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super; FONT-STYLE: italic">(3)</font></font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">105,340</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">19,000</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">17,900</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10,200</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">58,240</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="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">Natural
      gas supply purchase obligations&#8211;NJNG</font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">192,618</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">168,530</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">24,088</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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="#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">Demand
      fee commitments - NJNG</font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">565,983</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">98,357</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">202,561</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">163,078</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">101,987</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="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">Natural
      gas supply purchase obligations&#8211;NJRES</font></div>
              </td>
              <td align="right" valign="bottom" width="8%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">972,671</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">676,294</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">296,377</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#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="#cceeff">
              <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">Demand
      fee commitments - NJRES</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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">155,790</font></div>
              </td>
              <td align="right" 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="8%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">65,729</font></div>
              </td>
              <td align="right" 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="8%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">60,308</font></div>
              </td>
              <td align="right" 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="8%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">22,525</font></div>
              </td>
              <td align="right" 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="8%" style="BORDER-BOTTOM: black 0.5pt solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">7,228</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="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">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: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$2,942,090</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="8%" style="BORDER-BOTTOM: black 1.5pt double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$1,237,144</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="8%" style="BORDER-BOTTOM: black 1.5pt double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$684,548</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="8%" style="BORDER-BOTTOM: black 1.5pt double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$255,610</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="8%" style="BORDER-BOTTOM: black 1.5pt double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 2.05pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$764,788</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>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr>
              <td valign="top" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">&#160;(1)</font></div>
              </td>
              <td 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-STYLE: italic; FONT-FAMILY: times new roman">These
      obligations include an interest component, as defined under the related
      governing agreements or in accordance with the applicable tax
      statute.</font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">(2)</font></div>
              </td>
              <td 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-STYLE: italic; FONT-FAMILY: times new roman">This
      table only includes known obligations for uncertain tax positions. See
      Note 11. Adoption of FIN 48 and Income Taxes, in the Unaudited Condensed
      Consolidated Financial Statements, for a description of all uncertain tax
      positions, of which the ultimate amount and timing of settlement cannot be
      reasonably estimated.</font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">(3)</font></div>
              </td>
              <td 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-STYLE: italic; FONT-FAMILY: times new roman">Expenditures
      are estimated</font></div>
              </td>
            </tr>
        </table>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#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">For
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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008, there were NJR guarantees covering approximately $443 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 Unaudited Condensed Consolidated Balance Sheet.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As a
result of an increase in the estimated total project costs of Steckman Ridge,
from an original cost estimate of approximately $250 million to a revised
estimate of approximately $265 million, the Company is obligated to fund up to
$132.5 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 the facility once construction activities are
completed, therefore potentially reducing the aggregate recourse amount funded
by NJR. There can be no assurances that Steckman Ridge will eventually secure
such non-recourse project financing.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
capital expenditures for fiscal 2008 are estimated at $81.8 million, including
cash payments of $57.2 million during the nine months ended June 30,
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Off-Balance-Sheet
Arrangements</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
Company does not have any off-balance-sheet financing arrangements.</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Cash
Flow</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Operating
Activities</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
presented in the Unaudited Condensed Consolidated Statements of Cash Flows, cash
flow generated from operating activities totaled $144.3 million for the nine
months ended June 30, 2008, compared with cash flow from operations of $160.6
million for the same period in fiscal 2007. Net income was lower for the nine
month period ending June 30, 2008 as compared with the same period in fiscal
2007, primarily driven by higher net unrealized losses as a result of changes in
volumes and prices of derivative financial instruments. In addition, decreases
in Operating cash flows are typically affected by variations in working capital,
which are a function of the seasonality of NJR&#8217;s business, fluctuations in
wholesale natural gas prices, management of the deferral and recovery of gas
costs, and the timing of storage injections and withdrawals, as well as the
collections of receivables and payments of current liabilities. The components
of working capital that contributed to the decrease in operating cash flows for
the nine months ended June 30, 2008 as compared with the same period in fiscal
2007 are as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">at
      NJRES, an increase in natural gas inventory purchases for the nine months
      ended June 30, 2008 at higher average prices compared with the same period
      in the prior fiscal year to facilitate both increased storage inventory
      and greater sales volumes during fiscal 2008.</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 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 valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">an
      increase in sales volumes at NJRES of approximately 4.6 Bcf in fiscal 2008
      compared to 3.2 Bcf in prior fiscal year that resulted in an increase in
      receivable balances as of June 30, 2008 as compared to September 30, 2007.
      NJRES receivable balances, which are normally fully collected within 30
      days and do not have any allowance for doubtful accounts, were impacted by
      a 53.7 percent increase in the average sales price for the month of June
      2008 as compared to June 2007, as a result of the increase in the
      wholesale price of natural gas;</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 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 valign="top" width="72%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">an
      increase in broker margin balances as a result of the impact of adverse
      market price movements on NJRES&#8217; short (derivatives sold as an economic
      hedge of forecasted sales of the underlying commodity) futures
      positions.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
decreases in cash were offset by:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">at
      NJRES, an increase in gas purchases payable related to natural gas storage
      build and higher sales volumes during fiscal 2008; As of June 30, 2008,
      the average cost of gas inventory increased to approximately $13 per
      dekatherm from approximately $6 per dekatherm at the end of the prior
      fiscal period;</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 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 valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">an
      increase in gas purchases payable at NJNG as a result of a slight increase
      in commodity purchase volumes coupled with an average price increase of
      40.6 percent;</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 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 valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">a
      decrease in LNG and underground storage volumes at NJNG, which is a result
      of withdrawals through the winter heating season offset by lower volumes
      of gas added to inventory during the current injection season compared to
      the amount of gas injected during the same period in fiscal 2007. The
      decrease in volumes were slightly offset by a 2.1 percent increase in
      average inventory cost; 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 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 valign="top" width="73%">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">at
      NJNG, lower BGSS customer refunds during fiscal 2008 compared to fiscal
      2007.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG&#8217;s
MGP expenditures are currently expected to total $22.7 million in fiscal 2008
(see <font style="DISPLAY: inline; FONT-STYLE: italic">Note 12. Commitments and
Contingent Liabilities </font>in the Unaudited Condensed Consolidated Financial
Statements<font style="DISPLAY: inline; FONT-STYLE: italic">).</font></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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Investing
Activities</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
flows used in investing activities totaled $74.7 million for the nine months
ended June 30, 2008, compared with $94.2 million in the same period in fiscal
2007. The decrease was due primarily to a reduction in the investments in
Steckman Ridge offset by increases in utility plant expenditures during fiscal
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 June 30,
2008, CR&amp;R owned 83 acres of undeveloped land and a 56,400-square-foot
building on 5 acres of land.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On June
5, 2008, the FERC issued Steckman Ridge, LP a certificate of public convenience
and necessity authorizing the ownership, construction and operation of a natural
gas storage facility and associated facilities (the Steckman Ridge Project) in
Bedford County, Pennsylvania.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 once construction
of the facility is complete; however, there can be no assurances that this will
occur. NJR is obligated to fund up to its maximum of $132.5 million for the
construction and development of Steckman Ridge regardless of the ability of
Steckman Ridge, NJR or its partner to secure non-recourse financing. Through
June 30, 2008, NJR expended $71.6 million in acquisition and development costs.
NJR anticipates that construction on Steckman Ridge will be completed during the
first quarter of fiscal 2010.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJRES
does not currently anticipate any significant capital expenditures in fiscal
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Financing
Activities</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash flow
used in financing activities totaled $48.8 million for the nine months ended
June 30, 2008, compared with $65.7 million for the same period in the prior
fiscal year. Financing cash flows are seasonal in nature. Cash requirements are
lower as inventory levels decline toward the end of the withdrawal season.
Inventory levels were lower at the end of the third quarter of fiscal 2008
compared to the same period last year resulting in a reduction in short term
borrowings during fiscal 2008. This decrease in cash used was offset by payments
for treasury stock of $11.0 million, of which $7.7 million is related to settled
purchases made during the fourth quarter of fiscal 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG
provides funding for certain of its infrastructure projects through tax exempt,
variable rate debt, which has been issued to back six series of auction rate
securities (ARS) through the Economic Development Authority of New Jersey (EDA),
and are based on the borrowing costs of the ARS. During periods of reduced
liquidity for ARS, NJNG&#8217;s rate on its variable rate debt could default to a
maximum rate of the lesser of (i) 175 percent of the 30-day LIBOR or (ii) 10 to
12 percent, as applicable to a particular series of ARS. NJNG is currently
reviewing alternatives that include the refinancing of these bonds to eliminate
any increase in interest rate risk.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG
received $7.5 million during the first quarter of fiscal 2008, 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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      2. MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-STYLE: italic; FONT-FAMILY: Times New Roman">Credit
Ratings</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The table
below summarizes NJNG&#8217;s current 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):</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Standard
      and Poor&#8217;s</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Moody&#8217;s</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td 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">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">A</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-LEFT: black 0.25pt solid; 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">N/A</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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">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">A-1</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-LEFT: black 0.25pt solid; 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">P-1</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td 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">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">A+</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-LEFT: black 0.25pt solid; 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">Aa3</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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">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">Negative</font></div>
            </td>
            <td valign="bottom" width="14%" style="BORDER-LEFT: black 0.25pt solid; 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">Stable</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On April
3, 2008, S&amp;P adjusted NJNG&#8217;s corporate credit rating from A+ to
A.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NJNG&#8217;s
S&amp;P and Moody&#8217;s ratings are investment-grade ratings. S&amp;P and Moody&#8217;s
give NJNG&#8217;s commercial paper the highest rating within the Commercial Paper
investment-grade category. NJR is not a rated entity.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Financial
Risk Management</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Commodity
Market Risks</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">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 5.5 Bcf of natural gas (Gas Sales Contract) to an energy
marketing company.</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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
          </div>
        </div>
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="qq">ITEM 3.</a> QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following table reflects the changes in the fair market value of financial
derivatives related to natural gas purchases and sales from September 30, 2007
to June 30, 2008:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">September
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</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: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Increase</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(Decrease)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">in
      Fair</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Market&#160;Value</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Less</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Amounts</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Settled</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td 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">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">$(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">)</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">$&#160;&#160;41,448</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="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">$19,720</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(30,133</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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">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">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">(137,124</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">)</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">28,845</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">(76,523</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td 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">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">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">19,172</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">1,815</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">45,710</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 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">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">$
      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">$
      (76,504</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">)</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">$50,380</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(60,946</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
were no changes in methods of valuations during the quarter ended June 30,
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following is a summary of fair market value of financial derivatives related to
natural gas purchases and sales at June 30, 2008, by method of valuation and by
maturity for each fiscal year period:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="24%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: -11.6pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</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="11%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -7.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2009</font></div>
            </td>
            <td align="right" 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="right"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2010-2012</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">After</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2012</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Total</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Fair&#160;Value</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="24%">
              <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">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">$17,752</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(42,633)</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">$(10,555</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="7%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(35,436</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td align="left" valign="top" width="24%" 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">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">(8,115</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">)</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">(14,379)</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">(3,016</font></div>
            </td>
            <td align="left" valign="top" width="2%" 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">)</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">&#8212;</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">(25,510</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="24%" 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">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">$&#160;&#160;9,637</font></div>
            </td>
            <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(57,012)</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">$(13,571</font></div>
            </td>
            <td align="left" valign="top" width="2%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
            <td align="right" valign="bottom" width="7%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#8212;</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1.5pt double"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 1.5pt double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(60,946</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" 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">)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">The
following is a summary of financial derivatives by type as of June 30,
2008:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="27%" 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="10%" 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="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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Volume</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(Bcf)</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Price
      per</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Mmbtu</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Amounts
      included</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">in
      Derivatives (Thousands)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="27%">
              <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">NJNG</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Futures</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">(0.9</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">)</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">$7.43
      - $13.05</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;&#160;1,827</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="27%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Swaps</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">(1.8</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">)</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">$4.19
      - $16.59</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(31,960</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="27%">
              <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">NJRES</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Futures</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">(3.0</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">)</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">$7.37
      - $14.07</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(13,602</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="27%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Swaps</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">(71.4</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">)</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">$6.74
      - $18.01</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$(61,708</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="27%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 4.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Options</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">2.0</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">$7.50
      - $13.25</font></div>
            </td>
            <td align="right" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">$&#160;&#160;(1,213</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">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="27%" 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">NJR
      Energy</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: 4.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Swaps</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">6.0</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="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">$3.22
      - $ 4.39</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">$
      45,710</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 valign="top" width="27%" 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">Total</font></div>
            </td>
            <td valign="bottom" width="10%" 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="7%" 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">$(60,946</font></div>
            </td>
            <td align="left" 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="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">)</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following table reflects the changes in the fair market value of physical
commodity contracts from September 30, 2007 to&#160;&#160;June 30,
2008:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td align="left" valign="bottom" width="28%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</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: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">September
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2007</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: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Increase</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(Decrease)
      in Fair</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: -0.7pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Market&#160;Value</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Less</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Amounts</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Settled</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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Balance</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">June
      30,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">2008</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="28%" 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">NJRES</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">&#8212;</font></div>
            </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 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">$13,165</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">$12,952</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">$213</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
      <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; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
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 style="WIDTH: 100%" align="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The VaR
at June 30, 2008, using the variance-covariance method with a 95 percent
confidence level and a 1-day holding period, was $600,000. The VaR with a 99
percent confidence level and a 10-day holding period was $2.5 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Wholesale
Credit Risk</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following is a summary of gross and net credit exposures, grouped by investment
and noninvestment grade counterparties, as of June 30, 2008. 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unregulated
counterparty credit exposure as of June 30, 2008 is as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="50%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Gross
      Credit</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Exposure</font></div>
            </td>
            <td valign="top" width="4%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Net
      Credit</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Exposure</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="50%">
              <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">Investment
      grade</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">$316,307</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="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">$248,149</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="50%">
              <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">Noninvestment
      grade</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">7,560</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="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">&#8212;</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="50%">
              <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">Internally
      rated investment grade</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">12,171</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="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">4,964</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="50%" 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">Internally
      rated noninvestment grade</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">3,214</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="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">&#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>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="50%" 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">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">$339,252</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 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">$253,113</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">NJNG&#8217;s
counterparty credit exposure as of June 30, 2008 is as follows:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="50%" 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-STYLE: italic; FONT-FAMILY: times new roman">(Thousands)</font></div>
            </td>
            <td colspan="2" valign="bottom" width="13%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Gross
      Credit</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Exposure</font></div>
            </td>
            <td valign="bottom" width="4%" style="BORDER-BOTTOM: black 1px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Net
      Credit</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Exposure</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="50%">
              <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">Investment
      grade</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">$77,364</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="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">$63,943</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 valign="top" width="50%">
              <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">Noninvestment
      grade</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">2,677</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="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">6</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 valign="top" width="50%">
              <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">Internally
      rated investment grade</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">267</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="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">39</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 valign="top" width="50%" 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">Internally
      rated noninvestment grade</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">&#8212;</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="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">&#8212;</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 valign="top" width="50%" 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">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">$80,308</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 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">$63,988</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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
49</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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Interest
Rate Risk&#8211;Long-Term Debt</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008, the Company (excluding NJNG) had no variable-rate long-term
debt.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As of
June 30, 2008, NJNG is obligated with respect to loan agreements securing six
series of auction rate bonds totaling approximately $97.0 million of
variable-rate debt backed by securities issued by the EDA. The EDA bonds are ARS
and have an interest rate reset every 7 or 35 days, depending upon the
applicable series, when an auction is held for the purposes of determining the
interest rate pricing of the securities. The interest rate associated with the
NJNG variable-rate debt is based on the rates the EDA receives from its ARS. As
of June 30, 2008, most of the auctions surrounding the EDA ARS have failed,
resulting in the securities bearing interest at their maximum rates, as defined
in the ARS, as the lesser of (i) 175 percent of 30-day LIBOR or (ii) 10 to 12
percent per annum, as applicable to such series of ARS. While the failure of the
ARS auctions has no default impact on NJNG&#8217;s variable-rate debt, it does impact
its borrowing costs of the variable-rate debt. As such, NJNG currently has a
weighted average interest rate of 4.1 percent as of June 30, 2008. There can be
no assurance that the ARS securities of the EDA will have enough market
liquidity to return interest rates below their maximum rate.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Effects
of Inflation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="contr">ITEM 4. </a>CONTROLS AND PROCEDURES</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Disclosure
Controls and Procedures</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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>
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
50</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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      4. CONTROLS AND PROCEDURES (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 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 Unaudited Condensed Consolidated
Statements of Income and of Cash flows for the nine months ended June 30, 2007.
As set forth in Public Company Accounting Oversight Board Auditing Standard No.
5, a material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company's annual or interim
financial statements will not be prevented or detected on a timely
basis.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Changes
in Internal Control over Financial Reporting</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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
continues to of actively address and remediate the material weakness in internal
control over financial reporting described above. 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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 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">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 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 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">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 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 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">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 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 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">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
51</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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
I</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      4. CONTROLS AND PROCEDURES (Continued)</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 June 30, 2008, that have materially affected, or are
reasonably likely to materially affect, internal control over financial
reporting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
52</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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
II</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="legl">ITEM 1</a>. LEGAL <a name="p2">PR</a>OCEEDINGS</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 <font style="DISPLAY: inline; FONT-STYLE: italic">Part I, Item 1, Note 12,</font>
<font style="DISPLAY: inline; FONT-STYLE: italic">Commitment and Contingent
Liabilities&#8212;Legal Proceedings </font>in the Unaudited Condensed Consolidated
Financial Statements. No legal proceedings became reportable during the quarter
ended June 30, 2008 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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="rsk">ITEM 1A</a>. RISK FACTORS</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">While NJR
attempts to identify, manage and mitigate risks and uncertainties associated
with its business to the extent practical, under the circumstances, some level
of risk and uncertainty will always be present. Part I, Item 1A, "Risk Factors,"
of NJR&#8217;s 2007 Annual Report on Form 10-K and Part II, Item 1A, &#8220;Risk Factors&#8221; of
NJR&#8217;s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (2nd
Quarter 10-Q) include a detailed discussion of NJR&#8217;s risk factors. These risks
and uncertainties have the potential to materially affect NJR&#8217;s financial
condition and results of operations. There have not been any material changes
from the risk factors as previously disclosed by NJR in the 2007 Annual Report
on Form 10-K and the 2nd Quarter 10-Q.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="unreg">ITEM 2.</a> UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
      PROCEEDS</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In 1996,
the NJR&#8217;s Board of Directors (&#8220;Board&#8221;) authorized the Company to implement a
share repurchase program, which has been expanded several times since the
inception of the program. On November 14, 2007, the Board authorized an increase
to the plan to permit the repurchase, in the open market or in privately
negotiated transactions, of 1.5 million shares, bringing the total permitted
repurchases to 6.8 million shares as of that date. As of June 30, 2008, the
Company has 1.4 million shares of its common stock still available for
repurchase.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
following table sets forth NJR&#8217;s repurchase activity for the quarter ended June
30, 2008:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr bgcolor="#cceeff">
            <td valign="bottom" width="20%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Period</font></div>
            </td>
            <td valign="top" width="2%" 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="14%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      Number of Shares</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(or
      Units) Purchased</font></div>
            </td>
            <td valign="top" width="3%" 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="13%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Average
      Price Paid per Share (or Unit)</font></div>
            </td>
            <td valign="top" width="3%" 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="19%" style="BORDER-BOTTOM: black 1px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Total
      Number of Shares (or Units) Purchased as Part of Publicly Announced Plans
      or Programs</font></div>
            </td>
            <td valign="top" width="3%" 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="24%" style="BORDER-BOTTOM: black 1px solid">
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">Maximum
      Number</font></div>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 9pt; FONT-FAMILY: times new roman, times new roman, serif">(or
      Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased
      Under the Plans or Programs</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="20%">
              <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">04/01/08
      &#8211; 04/30/08</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="bottom" width="14%">
              <div align="center"><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 valign="bottom" width="13%">
              <div align="center"><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 valign="bottom" width="19%">
              <div 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="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="24%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,409,171</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td valign="top" width="20%">
              <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">05/01/08
      &#8211; 05/31/08</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="14%">
              <div 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="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="13%">
              <div 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="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="19%">
              <div 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="3%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="24%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,409,171</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">06/01/08
      &#8211; 06/30/08</font></div>
            </td>
            <td valign="top" 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 valign="top" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div 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="3%" 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="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div 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="3%" 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="19%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div 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="3%" 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="24%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,409,171</font></div>
            </td>
          </tr>
          <tr bgcolor="#cceeff">
            <td 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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">Total</font></div>
            </td>
            <td valign="top" 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 valign="top" width="14%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div 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="3%" 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="13%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div 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="3%" 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="19%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div 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="3%" 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="24%" style="BORDER-BOTTOM: black 0.5pt solid">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman, times new roman, serif">1,409,171</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">&#160;*
Share data has been retroactively adjusted to reflect a 3 for 2 stock split
effective March 3, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <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">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
53</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 style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">Part
II</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="center">
        <div>
          <table cellpadding="0" cellspacing="0" width="100%">
              <tr>
                <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">ITEM
      5. OTHER INFORMATION</font></div>
                  <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
                </td>
              </tr>
          </table>
        </div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman"><a name="othin">Ba</a>se Rate Case and Signed Stipulation</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As a
result of increases in NJNG&#8217;s operation, 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.</font></div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On July
30, 2008, NJNG and the Department of the Public Advocate, Division of Rate
Counsel&#160;signed an agreement that stipulated the principal financial terms
of a settlement of its petitioned rate increase. Pending final review and
approval by the BPU, NJNG would receive a revenue increase to its base rates of
approximately $32.5 million, which is inclusive of an approximate $13 million
impact of a change to the conservation incentive program baseline usage level,
receive an allowed return on equity component of 10.3 percent, reduce its
depreciation expense component from 3.0 percent to 2.34 percent, and reduce its
depreciation expense by $1.6 million annually as a result of the amortization of
previously recovered asset retirement obligations, all of which are expected to
commence on or about October 1, 2008. A copy of the Company&#8217;s press release
dated August 5, 2008 announcing this event is filed as Exhibit 99.1 to this
Quarterly Report on Form 10-Q and is incorporated by reference
herein.</font></div>
        </div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
        <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
      </div>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td 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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><a name="exh">ITEM</a> 6. EXHIBITS</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <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">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">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">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">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">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">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">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">Certification
      of the Chief Financial 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: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;
      99.1</font></td>
            <td align="left" valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;Press
      Release dated August 5, 2008</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*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 style="DISPLAY: block; TEXT-INDENT: 0pt"><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 style="WIDTH: 100%" align="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
          </div>
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times New Roman, serif">Page
54</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="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman">New
Jersey Resources Corporation</font></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
          </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-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a name="sig">SIG</a>NATURES</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 24pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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%">
              <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; TEXT-DECORATION: underline">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">(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>
            <td valign="top" width="39%"><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="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Date:
      <font style="TEXT-DECORATION: underline">August 5,
    2008</font></font></div>
            </td>
            <td valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></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">By<font style="DISPLAY: inline">:&#160;<font style="TEXT-DECORATION: underline">/s/ Glenn C.
      Lockwood</font></font></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">Glenn
      C. Lockwood</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">Senior
      Vice President and</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">Chief
      Financial Officer</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><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 style="WIDTH: 100%" align="left">
            <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></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": "0304"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-08359", "film-number": "08989771"}, "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"}}
form10q.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 JUNE 30, 2008
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, a non-accelerated, or a smaller reporting company. See
definition of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer:
x
Accelerated
filer:
o
Non-accelerated
filer:
o
Smaller
reporting company:
o
(Do
      not check if a smaller
reporting
      company)
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 August 1,
2008
was 42,034,445.
Table of Contents
New
Jersey Resources Corporation
TAB
LE OF CONTENTS
Page
Information Concerning Forward-Looking
      Statements
1
PART I – FINANCIAL INFORMATION
ITEM 1.
Unaudited Financial
      Statements
2
Notes to Unaudited Condensed Consolidated Financial
      Statements
6
Note 1    General
6
Note 2    Regulation
9
Note 3    Derivative
      Instruments
12
Note 4    Investments In Equity
      Investees
13
Note 5    Earnings Per
      Share
14
Note 6    Debt
14
Note 7    Capitalized Financing Costs And
      Deferred Interest
16
Note 8    Stock-Based
      Compensation
17
Note 9    Employee Benefit
      Plans
17
Note 10  Asset Retirement
      Obligations
18
Note 11  Adoption Of Fin 48 and Income
      Taxes
18
Note 12  Commitments And Contingent
      Liabilities
19
Note 13  Business Segment Data
21
Note 14  Other
22
ITEM 2.
Management's Discussion and Analysis of Financial Condition
      and Results of Operations for the Three and Nine Months Ended June
      30, 2008
22
ITEM 3.
Quantitative and Qualitative Disclosures About Market
      Risk
47
ITEM 4.
Controls and
      Procedures
50
PART II – OTHER INFORMATION
ITEM 1.
Legal
      Proceedings
53
ITEM 1A.
Risk
      Factors
53
ITEM 2.
Unregistered Sale of Equity Securities and Use of
      Proceeds
53
ITEM 5.
Other Information
54
ITEM 6.
Exhibits
54
Certification 31.1
54
Certification 31.2
54
Certification 32.1
54
Certification 32.2
54
Press Release dated August 5, 2008
Signatures
55
i
Table of Contents
New
Jersey Resources Corporation
Part
I
INF
ORMATION 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
increases
      in borrowing costs associated with variable-rate debt;
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.
Page
1
Table of Contents
New
Jersey Resources Corporation
Part
I
ITEM 1
. FINANCIAL
STATEMENTS
UN
AUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands, except per share data)
2008
2007
2008
2007
As
      Restated
(See
      Note 1)
As
      Restated
(See
      Note 1)
OPERATING
      REVENUES
$1,000,439
$662,218
$2,989,122
$2,428,662
OPERATING
      EXPENSES
Gas
      purchases
945,629
554,917
2,696,248
2,099,898
Operation
      and maintenance
34,187
33,969
100,971
94,622
Regulatory
      rider expenses
5,925
6,226
35,879
33,827
Depreciation
      and amortization
9,680
9,080
28,600
26,968
Energy
      and other taxes
10,711
11,478
58,245
55,698
Total
      operating expenses
1,006,132
615,670
2,919,943
2,311,013
OPERATING
      (LOSS) INCOME
(5,693
)
46,548
69,179
117,649
Other
      income
237
1,081
3,305
3,232
Interest
      expense, net
5,182
5,387
19,684
20,353
INCOME
      BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES
(10,638
)
42,242
52,800
100,528
Income
      tax provision
(2,663
)
17,272
19,225
39,058
Equity
      in earnings of affiliates, net of tax
378
407
1,548
1,302
NET
      (LOSS) INCOME
$    (7,597
)
$  25,377
$    35,123
$     62,772
(LOSS)
      EARNINGS PER COMMON SHARE*
BASIC
$(0.18
)
$0.60
$0.84
$1.50
DILUTED
$(0.18
)
$
0.60
$0.84
$1.49
DIVIDENDS
      PER COMMON SHARE
$
      0.28
$0.26
$0.83
$0.76
WEIGHTED
      AVERAGE SHARES OUTSTANDING*
BASIC
41,949
42,015
41,822
41,808
DILUTED
41,949
42,323
42,037
42,084
*
Share and per share data for the three and nine months ended June 30, 2007 have
been retroactively adjusted to reflect a 3 for 2 stock split effective March 3,
2008.
See Notes
to Unaudited Condensed Consolidated Financial Statements
Page
2
Table of Contents
New
Jersey Resources Corporation
Part
I
ITEM
      1. FINANCIAL STATEMENTS (Continued)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
As
      Restated
(See Note
  1
)
CASH
      FLOWS FROM OPERATING ACTIVITIES
Net
      income
$  35,123
$  62,772
Adjustments
      to reconcile net income to cash flows from operating
      activities:
Unrealized
      loss on derivative instruments, net of tax
75,095
40,618
Depreciation
      and amortization
29,369
27,194
Deferred
      income taxes
8,203
16,194
Manufactured
      gas plant remediation costs
(13,263
)
(15,346
)
Equity
      in earnings from investments, net of distributions and tax
388
(749
)
Cost
      of removal – asset retirement obligations
(888
)
(1,461
)
Contributions
      to employee benefit plans
(521
)
(450
)
Changes
      in:
Components
      of working capital
(31,657
)
4,705
Other
      noncurrent assets
24,850
38,794
Other
      noncurrent liabilities
17,596
(11,669
)
Cash
      flows from operating activities
144,295
160,602
CASH
      FLOWS FROM INVESTING ACTIVITIES
Expenditures
      for:
Utility
      plant
(51,472
)
(37,325
)
Real
      estate properties and other
(888
)
(2,485
)
Cost
      of removal
(5,775
)
(3,685
)
Investments
      in equity investees
(16,595
)
(52,500
)
Proceeds
      from asset sales
—
1,792
Cash
      flows used in investing activities
(74,730
)
(94,203
)
CASH
      FLOWS FINANCING ACTIVITIES
Proceeds
      from issuance of common stock
13,072
13,947
Proceeds
      from long-term debt
125,000
—
Tax
      benefit from stock options exercised
677
2,565
Proceeds
      from sale-leaseback transaction
7,485
5,482
Payments
      of long-term debt
(3,977
)
(2,822
)
Purchases
      of treasury stock
(11,040
)
—
Payments
      of common stock dividends
(33,451
)
(31,220
)
Net
      payments of short-term debt
(146,579
)
(53,621
)
Cash
      flows used in financing activities
(48,813
)
(65,669
)
Change
      in cash and temporary investments
20,752
730
Cash
      and temporary investments at beginning of period
5,140
4,991
Cash
      and temporary investments at end of period
$   25,892
$    5,721
CHANGES
      IN COMPONENTS OF WORKING CAPITAL
Receivables
$(211,448
)
$
      (65,769
)
Inventories
73,666
123,177
(Under)/overrecovered
      gas costs
(18,037
)
13,113
Gas
      purchases payable
199,407
(21,460
)
Prepaid
      and accrued taxes, net
21,075
(235
)
Accounts
      payable and other
(8,871
)
4,610
Restricted
      broker margin accounts
(73,016
)
6,913
Customers'
      credit balances and deposits
(11,632
)
(44,207
)
Other
      current assets
(2,801
)
(11,437
)
Total
$
      (31,657
)
$    4,705
SUPPLEMENTAL
      DISCLOSURES OF CASH FLOWS INFORMATION
Cash
      paid for:
Interest
      (net of amounts capitalized)
$17,972
$18,618
Income
      taxes
$25,477
$37,595
See
Notes to Unaudited Condensed Consolidated Financial Statements
Page
3
Table of Contents
New
Jersey Resources Corporation
Part
I
ITEM
      1. FINANCIAL STATEMENTS (Continued)
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June
      30,
September
      30,
(Thousands)
2008
2007
PROPERTY,
      PLANT AND EQUIPMENT
Utility
      plant, at cost
$
1,347,117
$1,299,445
Real
      estate properties and other, at cost
29,579
28,793
1,376,696
1,328,238
Accumulated
      depreciation and amortization
(374,391
)
(357,367
)
Property,
      plant and equipment, net
1,002,305
970,871
CURRENT
      ASSETS
Cash
      and temporary investments
25,892
5,140
Customer
      accounts receivable:
Billed
343,148
132,444
Unbilled
10,352
8,895
Allowance
      for doubtful accounts
(3,879
)
(3,166
)
Regulatory
      assets
31,821
24,634
Gas
      in storage, at average cost
365,105
439,168
Materials
      and supplies, at average cost
5,430
5,033
Prepaid
      state taxes
36,570
28,034
Derivatives,
      at fair value
291,196
138,986
Broker
      margin account
75,640
12,345
Other
12,186
8,353
Total
      current assets
1,193,461
799,866
NONCURRENT
      ASSETS
Investments
      in equity investees
107,292
86,743
Regulatory
      assets
282,020
312,369
Derivatives,
      at fair value
65,751
44,306
Restricted
      cash – construction fund
4,200
4,200
Other
12,998
12,390
Total
      noncurrent assets
472,261
460,008
Total
      assets
$
2,668,027
$2,230,745
See Notes
to Unaudited
Condensed
Consolidated Financial Statements
Page
4
Table of Contents
New
Jersey Resources Corporation
Part
I
ITEM
      1. FINANCIAL STATEMENTS (Continued)
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION
AND LIABILITIES
June
      30,
September
      30,
(Thousands)
2008
2007
CAPITALIZATION
Common
      stock equity
$
657,745
$ 
       644,797
Long-term
      debt
481,613
383,184
Total
      capitalization
1,139,358
1,027,981
CURRENT
      LIABILITIES
Current
      maturities of long-term debt
35,037
4,338
Short-term
      debt
109,900
256,479
Gas
      purchases payable
417,743
218,336
Accounts
      payable and other
53,086
64,386
Dividends
      payable
11,750
10,633
Deferred
      and accrued taxes
42,250
9,031
Regulatory
      liabilities
—
9,583
New
      Jersey clean energy program
4,186
8,832
Derivatives,
      at fair value
340,632
79,243
Broker
      margin account
5,422
15,143
Customers'
      credit balances and deposits
15,632
27,262
Total
      current liabilities
1,035,638
703,266
NONCURRENT
      LIABILITIES
Deferred
      income taxes
170,388
216,258
Deferred
      investment tax credits
7,272
7,513
Deferred
      revenue
9,270
9,806
Derivatives,
      at fair value
77,047
38,085
Manufactured
      gas plant remediation
105,340
105,340
Postemployment
      benefit liability
29,429
25,743
Regulatory
      liabilities
62,232
61,270
New
      Jersey clean energy and conservation incentive programs
914
3,992
Asset
      retirement obligation
24,146
23,895
Other
6,993
7,596
Total
      noncurrent liabilities
493,031
499,498
Total
      capitalization and liabilities
$
2,668,027
$2,230,745
See Notes
to Unaudited Condensed Consolidated Financial Statements
Page
5
Table of Contents
New
Jersey Resources Corporation
Part
I
NO
TES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS
1.
GEN
ERAL
The
accompanying unaudited condensed consolidated financial statements have been
prepared by New Jersey Resources Corporation (NJR or the Company) in accordance
with 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 the Company. These unaudited 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
unaudited 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. 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. Retail Holdings'
two principal subsidiaries are NJR Home Services (NJRHS) and Commercial Realty
& Resources (CR&R).
In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments necessary for a fair presentation
of the results of the interim periods presented. 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.
Common
Stock Equity
On
January 23, 2008, NJR's Board of Directors approved a 3 for 2 stock split of the
Company's common stock in the form of a dividend for the Company's common stock
shareholders of record on February 8, 2008. The additional shares were issued on
March 3, 2008, resulting in an increase in average shares outstanding from
approximately 28 million to approximately 42 million. All share-related
information for prior periods has been adjusted throughout this report on a
retroactive basis to reflect the effects of the stock split.
Customer
Accounts Receivable
Customer
accounts receivable include outstanding billings from the following subsidiaries
as of:
June
      30,
September
      30,
($ in thousands)
2008
2007
NJNG
$  45,523
13
%
$    5,583
4
%
NJRES
289,371
84
120,274
91
NJRHS
      and other
8,254
3
6,587
5
Total
$343,148
100
%
$132,444
100
%
Accounts
receivable related to estimated unbilled revenues and allowance for doubtful
accounts are associated with NJNG only.
Page
6
Table of Contents
New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
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 and Income
Taxes
.
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 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, for which the
Company chooses to apply the fair value option, 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.
On April
10, 2007, the FASB issued FASB Staff Position No. FIN 39-1 (FSP FIN 39-1),
Amendment of FASB Interpretation No.
39.
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.
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 potential impact on its statement of financial position
and results of operations.
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New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
On
December 4, 2007, the FASB issued SFAS No. 160,
Non-controlling 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 non-controlling interest in one or more
subsidiaries. SFAS 160 clarifies that a non-controlling 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.
In March
2008, the FASB issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities,
(SFAS 161). SFAS 161 requires
enhanced qualitative and quantitative disclosures on the objectives and
accounting for derivatives and related hedging activities, as well as their
impact to the financial statements. SFAS 161 is effective for fiscal years and
interim periods beginning after November 15, 2008. Early application and as well
as comparative disclosures for earlier periods at initial adoption are
encouraged. The Company is currently evaluating the effect of adoption of SFAS
161 on its footnote disclosures.
Restatement
Subsequent
to the issuance of June 30, 2007 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
Unaudited 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 and nine-month periods ended June 30, 2007.
Accordingly,
the following tables set forth the effects of the restatement on applicable line
items in the Unaudited Condensed Consolidated Statements of Income and Unaudited
Condensed Consolidated Statements of Cash Flows for the three and nine months
ended June 30, 2007. 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 the three and nine months ended June 30, 2007.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three
      Months Ended
June
      30, 2007
Nine
      Months Ended
June
      30, 2007
(Thousands)
As
Previously
Reported
Adjustment
As
Restated
As
Previously
Reported
Adjustment
As
Restated
Operating
      revenue
$665,358
$  (3,140)
$662,218
$2,431,459
$  (2,797)
$2,428,662
Gas
      purchases
$610,178
$(55,261)
$554,917
$2,034,332
$   65,566
$2,099,898
Total
      operating expenses
$670,931
$(55,261)
$615,670
$2,245,447
$   65,566
$2,311,013
Operating
      (Loss) Income
$
      (5,573)
$   52,121
$  46,548
$   186,012
$(68,363)
$   117,649
Other
      income
$    1,758
$     (677)
$    1,081
$       5,397
$  (2,165)
$       3,232
(Loss)
      Income before income taxes and equity in earnings of
      affiliates
$
      (9,202)
$   51,444
$  42,242
$   171,056
$
      (70,528)
$   100,528
(Loss)
      Income tax provision
$
      (4,250)
$   21,522
$  17,272
$     67,357
$
      (28,299)
$     39,058
Equity
      in earnings, net of tax
$         —
$        407
$       407
$            —
$      1,302
$       1,302
Net
      (Loss) Income
$
      (4,952)
$   30,329
$  25,377
$   103,699
$
      (40,927)
$     62,772
Basic
      (loss)earnings per share*
$   (0.18)
$       0.78
$      0.60
$         3.72
$     (2.22)
$         1.50
Diluted
      (loss) earnings per share*
$   (0.18)
$       0.78
$      0.60
$         3.70
$     (2.21)
$         1.49
*  Per
share data for 2007 has been retroactively adjusted to reflect a 3 for 2 stock
split effective March 3, 2008.
Page
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New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH
FLOWS FROM OPERATING ACTIVITIES
Nine
      Months Ended
June
      30, 2007
(Thousands)
As
Previously
Reported
Adjustment
As
Restated
Net
      Income
$
103,699
$
(40,927
)
$
62,772
Unrealized
      loss (gain) on derivative instruments, net of tax
$
(309
)
$
40,927
$
40,618
Equity
      in earnings from investments, net of distributions and tax
$
—
$
(749
)
$
(749
)
Other
      noncurrent assets
$
39,347
$
(553
)
$
38,794
Other
      noncurrent liabilities
$
(12,971
)
$
1,302
$
(11,669
)
2.
REG
ULATION
Filed
Base Rate Case and Signed Stipulation
As a
result of increases in NJNG's operation, 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
request 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.
On July
30, 2008, NJNG and the Department of the Public Advocate, Division of Rate
Counsel (Rate Counsel) signed an agreement that stipulated the principal
financial terms of a settlement of its petitioned rate increase. Pending final
review and approval by the BPU, NJNG would receive a revenue increase to its
base rates of approximately $32.5 million, which is inclusive of an approximate
$13 million impact of a change to the conservation incentive program baseline
usage level, receive an allowed return on equity component of 10.3 percent,
reduce its depreciation expense component from 3.0 percent to 2.34 percent, and
reduce its depreciation expense by $1.6 million annually as a result of the
amortization of previously recovered asset retirement obligations, all of which
are expected to commence on or about October 1, 2008.
As a
result of the signed stipulation, NJNG recorded an aggregate after-tax charge in
the third quarter of fiscal 2008 of approximately $1.5 million, as it determined
that certain regulatory assets were no longer recoverable in future rates from
customers (approximately $769,000) and changed its computation for its allowance
for funds used during construction (approximately $744,000).
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 over a one-year period 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.
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.
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New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
On May
30, 2008, NJNG filed a petition with the BPU for the Annual Review of its CIP
Program for recoverable CIP amounts for fiscal 2008 and to adjust its CIP
recovery rates effective October 1, 2008. This petition is asking to recover an
additional $6.8 million.
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 June 30, 2008, NJNG had a remaining liability of $914,000 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 for its residential and
small commercial customers to reflect increases or decreases in the cost of
natural gas sold to customers.
Ÿ
On
      October 3, 2007, the BPU provisionally approved a decrease to NJNG's BGSS
      rate effective October 4, 2007, which resulted in a 3.6 percent decrease
      to the average residential heating customer bill. On June 24, 2008, the
      Administrative Law Judge in this proceeding approved a settlement of the
      parties to make the provisional rates final. The Judge's decision is
      currently pending final approval before the BPU.
Ÿ
On
      November 26, 2007, NJNG notified the BPU that it would provide refunds to
      customers and subsequently issued a credit totaling $32.0 million in
      December 2007, as a result of the decrease in the anticipated costs of
      wholesale natural gas prices.
Ÿ
In
      March 2008, NJNG, the BPU staff and the New Jersey Department of the
      Public Advocate, Division of Rate Counsel (Rate Counsel) entered into a
      stipulation to resolve certain matters related to NJNG's fiscal year 2007
      BGSS filing. This stipulation was approved by the BPU on May 9, 2008 and
      resulted in NJNG recording a non-recurring settlement charge to its BGSS
      costs of $300,000.
Ÿ
On
      May 30, 2008, NJNG filed for an increase to the periodic BGSS factor to be
      effective October 1, 2008 that would increase an average residential
      customer's bill by approximately 18.0 percent due to an increase in the
      price of wholesale natural gas. A public hearing on this issue is
      scheduled for July 31, 2008.
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 retained by NJNG from 20.0 percent to 15.0 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 the finalization of the base
rate case proceedings. Pending final review and approval by the BPU, the July
30, 2008 agreement among NJNG and Rate Counsel provides for the extension of the
incentive programs through October 31, 2011, along with a moderate expansion of
the storage incentive and FRM programs.
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 (MGP) 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:
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 the underrecovery of
      prior fiscal year obligations (NJNG's liability as of June 30, 2008 was
      $4.2 million); and,
Ÿ
a
      decrease to the statewide USF recovery rate, which has a negligible impact
      on customer rates.
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New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED 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 gross
margin variations incurred during the fiscal 2005 and 2006 winter periods. In
its May 30, 2008 CIP filing with the BPU, NJNG has proposed decreasing its
current WNC rate to fully recover its remaining balance of approximately $1.5
million.
In
February 2008, NJNG filed an application regarding its SBC. The overall request
would result in no change to the current rates approved in October
2007.
In June
2008, the natural gas utilities in the State of New Jersey collectively filed
with the BPU to increase the statewide USF recovery rate effective October 1,
2008. NJNG believes the increase will have a negligible impact on
customers.
Regulatory
Assets & Liabilities
The
Company had the following regulatory assets, all related to NJNG, on the
Unaudited Condensed Consolidated Balance Sheets:
(Thousands)
June
      30,
2008
September
      30,
2007
Recovery
      Period
Regulatory
      assets–current
WNC
$    1,454
$    8,105
Less
      than one year
(1)
Underrecovered
      gas costs
8,454
—
Less
      than one year
(2)
CIP
21,913
16,529
Less
      than one year
(3)
Total
      current
$  31,821
$  24,634
Regulatory
      assets–noncurrent
Remediation
      costs (Note 12)
Expended,
      net
$  87,415
$  85,071
(4)
Liability
      for future expenditures
105,340
105,340
(5)
CIP
2,476
—
(6)
Deferred
      income and other taxes
12,726
13,979
Various
(7)
Derivatives
      (Note 3)
30,133
51,861
(8)
Postemployment
      benefit costs (Note 9)
33,463
33,988
(9)
SBC
10,467
22,130
Various
(10)
Total
      noncurrent
$282,020
$312,369
(1)
Recoverable
      as a result of BPU approval in October 2007, without interest. This
      balance reflects the net results for the winter period of fiscal 2006. No
      new WNC activity is being recorded due to the existence of the
      CIP.
(2)
Recoverable,
      subject to BPU approval, through BGSS, without
interest.
(3)
Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $10.2 million relating to the weather component of
      the calculation and approximately $11.7 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 included in rates when actual
      expenditures are incurred.
(6)
Recoverable
      or refundable, subject to BPU annual approval, without interest. Balance
      includes approximately $0.7 million relating to the weather component of
      the calculation and approximately $1.7 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.
Page
11
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New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
The
Company had the following regulatory liabilities, all related to NJNG, on the
Unaudited Condensed Consolidated Balance Sheets:
(Thousands)
June
      30,
2008
September
      30,
2007
Regulatory
      liability–current
Overrecovered
      gas costs
$
—
$
9,583
Total
      current
$
—
$
9,583
Regulatory
      liabilities–noncurrent
Cost
      of removal obligation
(1)
$
62,232
$
60,094
Market
      development fund (MDF)
(2)
—
1,176
Total-noncurrent
$
62,232
$
61,270
(1)
NJNG
      accrues and collects for cost of removal in rates. This liability
      represents collections in excess of actual expenditures. Approximately
      $20.6 million, including accretion of $1.1 million for the nine-month
      period ended June 30, 2008 of regulatory assets relating to asset
      retirement obligations have been netted against the cost of removal
      obligation as of June 30, 2008 (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.
The
Company and its subsidiaries are involved in the wholesale purchase and sale of
natural gas. Under EITF 03-11,
Reporting Realized Gains and Losses
on Derivative Instruments That Are Subject to FASB Statement No. 133 and Not
"Held for Trading Purposes" as Defined in Issue No 02-3,
NJR has
concluded that this is non-trading activity, and therefore, to the extent the
natural gas is physically delivered, NJR presents its revenues and cost of gas
on a gross basis in the Unaudited Condensed Consolidated Statements of Income.
Changes in the fair values of financial derivative transactions as well as
certain physical commodity contracts, as described below, are recognized as a
component of Gas purchases in the Unaudited Condensed Consolidated Statements of
Income.
On
October 1, 2007, the Company changed the treatment of its physical commodity
contracts at NJRES, such that the changes in fair value of contracts entered
into after September 30, 2007 are now included currently in earnings, 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 Unaudited Condensed Consolidated
Balance Sheets, with changes in fair value being reflected as a component of gas
purchases on the Unaudited 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 met and were designated under the normal
purchase normal sale scope exception, continue to be accounted for under
settlement accounting.
All of
the Company's derivative financial instruments (financial futures, options or
swaps), are accounted for in accordance with SFAS 133 and recorded at fair
value in the Unaudited Condensed Consolidated Balance Sheets. Changes in fair
value, which are referred to as unrealized gains and losses are recorded as a
component of Gas purchases or Operating revenues, for NJRES and NJR Energy,
respectively, in the Unaudited Condensed Consolidated Statements of Income.
Changes in fair value of NJNG's financial derivative instruments are recorded as
a component of Regulatory assets or liabilities in the Unaudited 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.
Page
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New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
The
Company enters into financial derivative instruments as an economic hedge of the
sale of natural gas. The derivatives are marked at fair value and recognized in
the Unaudited Condensed Consolidated Statements of Income, as a component of Gas
purchases, in the current period; however, the change in value of the natural
gas is recognized only when that natural gas has been sold, which is normally in
a future period. Therefore, the realized gains or losses that result from the
settlement of these derivative instruments prior to the actual sale of the
natural gas that is being economically hedged create volatility in the results
of NJR; volatility is also created, in the opposite direction, when the actual
sale of the natural gas occurs at a later date. The true economic result will
remain unchanged regardless of the settlement of the derivative instrument
relative to the ultimate sale of the natural gas.
Unrealized
gains (losses) at NJRES related to physical commodity contracts and financial
instruments and certain realized gains (losses) at NJRES related to derivative
instruments that are included as a component of Gas purchases, and unrealized
gains (losses) at NJR Energy related to derivative financial instruments that
are included as a component of Operating revenues, for the three and nine months
ended June 30, 2008 and 2007, respectively, are as follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
NJRES
      (Included as part of Gas purchases):
Unrealized
      (losses) gains – Physical Commodity Contracts
$     (918
)
$       —
$        213
$        —
Unrealized
      (losses) gains – Financial Instruments
(37,796
)
53,459
(165,970
)
(64,408
)
Certain
      net realized gains (losses) – Financial Instruments (economic
      hedge)
22,428
1,802
26,057
(1,158
)
Subtotal
      NJRES
$(16,286
)
$55,261
$(139,700
)
$(65,566
)
NJR
      Energy (Included as part of Operating revenues):
Unrealized
      gains (losses) – Financial Instruments
10,872
(3,140
)
17,357
(2,797
)
Total
      NJRES and NJR Energy unrealized and realized (losses)
gains
$  (5,414
)
$52,121
$(122,343
)
$(68,363
)
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)
June
      30,
2008
September 30,
2007
NJNG
      broker margin deposit
$   
          38
$   12,345
NJNG
      broker margin (liability)
$
      (5,422
)
$
—
NJRES
      broker margin deposit (liability)
$75,602
$(15,143)
4.
I
NVE
STMENTS IN EQUITY
INVESTEES
NJR's
Investments in equity investees include the following investments:
(Thousands)
June
      30,
2008
September 30,
2007
Steckman
      Ridge
$  76,118
$56,726
Iroquois
22,713
22,073
Other
8,461
7,944
Total
$107,292
$86,743
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New
Jersey Resources Corporation
Part
I
NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
NJR uses
the equity method of accounting for its investments in Steckman Ridge and
Iroquois.
Other
investments represent immaterial aggregate investments in equity securities of
publicly traded energy companies, 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.
The
following tables set forth the financial information for Iroquois for the
periods as indicated:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Operating
      revenues
$40,854
$39,830
$124,309
$122,423
Operating
      income
$20,609
$19,246
$  65,957
$  60,958
Net
      income
$  8,493
$  7,281
$  27,532
$  23,315
(Millions)
June
      30,
2008
September 30,
2007
Total
      assets
$771.1
$814.3
5.
EAR
NINGS PER SHARE
The
following table sets forth the calculation of the Company's basic and diluted
earnings per share:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands,
      except per share amounts)
2008
2007*
2008
2007*
Net
      (Loss) Income, as reported
$(7,597
)
$25,377
$35,123
$62,772
Basic
      earnings per share
Weighted
      average shares of common stock outstanding–basic
41,949
42,015
41,822
41,808
Basic
      (loss) earnings per common share
$(0.18
)
$0.60
$0.84
$1.50
Diluted
      earnings per share
Weighted
      average shares of common stock outstanding–basic
41,949
42,015
41,822
41,808
Incremental
      shares **
—
308
215
276
Weighted
      average shares of common stock outstanding–diluted ***
41,949
42,323
42,037
42,084
Diluted
      (loss) earnings per common share
$(0.18
)
$0.60
$0.84
$1.49
*
Share
      and per share data for 2007 have been retroactively adjusted to reflect a
      3 for 2 stock split effective March 3, 2008.
**
Incremental
      shares consist of stock options, stock awards and performance
      units.
***
The
      incremental shares noted above were not included in the computation of
      diluted loss per common share for the three months ended June 30, 2008 as
      their effect would have been
anti-dilutive.
6.
DEBT
NJR
On
December 13, 2007, NJR refinanced its prior senior credit facility, scheduled to
expire on December 16, 2007, for a new $325 million, five-year, revolving,
unsecured credit facility. The new credit facility permits the borrowing of
revolving loans and swing loans, as well as the issuance of letters of credit.
Swing loans are loans made available on a same day basis for an aggregate
principal amount of up to $50 million and repayable in full within a maximum of
seven days of borrowing. It also permits an increase to the facility, from time
to time, with the
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
existing
or new lenders, in a minimum of $5 million increments up to a maximum $100
million. Borrowings under the new 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 used the initial borrowings under the new
credit facility to refinance its prior credit facility and pay all related fees
and expenses. In addition, certain of NJR's non-regulated subsidiaries have
guaranteed to the lenders all of NJR's obligations under the new credit
facility.
On
February 15, 2008, NJR entered into a new agreement for a stand-alone letter of
credit that may be drawn upon through February 15, 2009 for up to $15 million.
No amounts have been drawn under this letter of credit as of June 30,
2008.
As of
June 30, 2008, NJR had one letter of credit outstanding, totaling $500,000, on
behalf of NJRES. It was issued in conjunction with a long-term natural gas
storage agreement and expires on December 31, 2008. This letter of credit
reduces the amount available under NJR's committed credit facility by the same
amount. NJR does not anticipate that this letter of credit will be drawn upon by
the counterparties and expects that the letter of credit will be renewed as
necessary.
NJNG
In
October 2007, NJNG entered into a new agreement for standby letters of credit
that may be drawn upon through December 15, 2009 for up to $50 million. As of
June 30, 2008, letters of credit totaling $26.0 million have been issued under
this agreement. These letters of credit do not reduce the amount available to be
borrowed under NJNG's credit facility. NJNG does not anticipate that these
letters of credit will be drawn upon by the counterparty, and the agreement will
be renewed as necessary, upon its expiration.
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.
In May
2008, NJNG issued $125 million of 5.6 percent senior notes due May 15, 2018
(Notes) in the private placement market pursuant to a note purchase agreement.
The notes are secured until the release date (which is the date at which the
security provided by the pledge under NJNG's mortgage indenture would no longer
be available to holders of any outstanding series of NJNG's senior secured notes
and such indebtedness would become senior unsecured indebtedness) by an equal
amount of NJNG first mortgage bonds (Series LL), and interest is payable on the
Notes semi-annually. The proceeds from the Notes were used to refinance
short-term debt and will fund capital expenditure requirements.
NJNG is
obligated with respect to loan agreements securing six series of variable rate
bonds totaling approximately $97.0 million of variable-rate debt backed by
securities issued by the New Jersey Economic Development Authority (EDA). The
EDA bonds are commonly referred to as auction rate securities (ARS) and have an
interest rate reset every 7 or 35 days, depending upon the applicable series,
when an auction is held for the purposes of determining the interest rate of the
securities. The interest rate associated with the NJNG variable-rate debt is
based on the rates on the EDA ARS. As of June 30, 2008, most of the auctions
surrounding the EDA ARS have failed, resulting in those bonds bearing interest
at their maximum rates, defined in the EDA ARS as the lesser of (i) 175 percent
of 30-day LIBOR or (ii) 10 to 12 percent per annum, as applicable to such series
of ARS. As of June 30, 2008, the 30-day LIBOR rate was 2.5 percent. While the
failure of the ARS auctions does not signify or constitute a default on NJNG,
the EDA ARS does impact NJNG's borrowing costs of the variable-rate debt. As
such, NJNG currently has a weighted average interest rate of 4.1 percent as of
June 30, 2008, compared with a weighted average interest rate of 3.9 percent as
of September 30, 2007. There can be no assurance that the EDA ARS will have
enough market liquidity to return interest rates below their maximum
rate.
Neither
NJNG nor the results of its operations are obligated or pledged to support the
NJR or NJRES credit facilities.
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
NJRES
As of
June 30, 2008 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 June 30, 2008.
Consolidated
There
were no issuances or redemptions of long-term debt securities for NJR or NJRES
or redemptions for NJNG during the nine months ended June 30, 2008.
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:
June
      30,
September
      30,
(Thousands)
2008
2007
NJR
Long
      - term debt
(1)
$  75,000
$  75,000
Bank
      credit facilities
$325,000
$325,000
Amount
      outstanding at end of period
$109,900
$  40,250
Weighted
      average interest rate at end of period
2.73
%
6.17
%
NJNG
Long
      - term debt
(2)
$379,800
$254,800
Bank
      credit facilities
$250,000
$250,000
(3)
Amount
      outstanding at end of period
—
$175,700
Weighted
      average interest rate at end of period
—
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)
Amounts
      are comprised of $25.0 million issued in March 2004 and $50.0 million
      issued in September 2007.
(2)
Long-term
      debt excludes lease obligations of $61.8 million
and $57.6 million
at June
      30, 2008 and September 30, 2007,
respectively.
(3)
Amount
      includes only committed credit facilities for NJNG short-term borrowings.
      Also included in short-term debt on the Unaudited Condensed Consolidated
      Balance Sheet as of September 30, 2007, is $10.5 million 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 Unaudited Condensed Consolidated Balance
Sheets, are as follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
AFUDC
      – Utility plant
$244
$321
$   871
$1,058
Weighted
      average rate
4.8
%
5.37
%
4.8
%
5.36
%
Capitalized
      interest – Real estate properties and other
$  14
$  86
$     79
$   216
Weighted
      average interest rates
3.01
%
5.34
%
3.99
%
5.42
%
Capitalized
      interest – Investments in equity investees
$827
$716
$2,513
$   927
Weighted
      average interest rates
5.58
%
5.35
%
5.73
%
5.36
%
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
The AFUDC
amounts shown in the table above for three and nine months ended June 30, 2008
and 2007, represent an interest cost component only, as agreed to in NJNG's
signed stipulation with Rate Counsel as discussed in Note 2.
Regulation – Filed Base Rate Case
and Signed Stipulation
.
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 includes $515,000 and $698,000 of
interest related to these SBC program costs for the three months ended June 30,
2008 and 2007, respectively, and $1.9 million and $2.3 million for the nine
months ended June 30, 2008 and 2007, respectively.
8.
STO
CK-BASED
COMPENSATION
On
November 14, 2007, the Company granted 61,980 performance units, which are
market condition awards that vest in September 2010, and 61,980 shares of
restricted stock, which vest in equal installments over three years, subject to
certain conditions. On the same date, the Company also granted 35,385 restricted
shares that vested immediately. All shares noted above have been adjusted to
reflect the additional shares distributed related to NJR's 3 for 2 stock split
on March 3, 2008 and have a split adjusted grant date fair value of
$31.84.
During
the first nine months of fiscal 2008, included in operation and maintenance
expense is $2.0 million related to stock-based compensation. As of June 30, 2008
there remains $3.4 million of deferred compensation related to unvested shares
and options, which is 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
June
      30,
Nine
      Months
Ended
June
      30,
Three
      Months
Ended
June
      30,
Nine
      Months
Ended
June
      30,
(Thousands)
2008
2007
2008
2007
2008
2007
2008
2007
Service
      cost
$    728
$    733
$
      2,185
$
      2,200
$
      436
$   454
$1,360
$
      1,364
Interest
      cost
1,648
1,554
4,945
4,661
810
757
2,441
2,271
Expected
      return on plan assets
(2,183
)
(2,052
)
(6,548
)
(6,156
)
(627
)
(541
)
(1,837
)
(1,622
)
Recognized
      actuarial loss
275
399
826
1,197
181
266
624
797
Prior
      service cost amortization
14
21
42
63
19
20
58
59
Transition
      obligation amortization
—
—
—
—
89
89
267
268
Net
      periodic cost
$    482
$    655
$
      1,450
$
      1,965
$
      908
$1,045
$2,913
$
      3,137
For
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.
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
10.
ASSE
T 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 pipelines out of
service.
The
following is an analysis of the change in the ARO liability for the period ended
June 30, 2008, (in thousands):
Balance
      at October 1, 2007
$23,895
Accretion
1,050
Additions
89
Retirements
(888
)
Balance
      at June 30, 2008
$24,146
Accretion
amounts are not reflected as an expense on NJR's Unaudited 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 Unaudited Condensed Consolidated Balance Sheet.
11.
ADO
PTION OF FIN 48 AND INCOME
  TAXES
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 $2.2 million, as well
as the additional amount recognized associated with the adoption of FIN 48, are
included as a component of Deferred and accrued taxes in the Current
classification of the Unaudited Condensed Consolidated Balance Sheets. The
following table represents the increase in liability with respect to the
adoption of FIN 48:
As
      of October 1,
($
      in millions)
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)
$   3.1
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
Unaudited Condensed Consolidated Balance Sheets.
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 fixed assets at NJNG. The Company filed an automatic
change in method of accounting, which is currently under audit with the
Internal
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
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
Unaudited Condensed Consolidated Statements of Income.
The
Company and one or more of its subsidiaries files, or expects to file, income
and or franchise tax returns in the United States Federal jurisdiction and in
the states of New Jersey, New York, Connecticut, Texas and Louisiana. 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.
Included
in the Unaudited Condensed Consolidated Statement of Operations, as part of
Income tax expense, is a one-time after-tax interest charge of $0.98 million to
correct a previously taken tax position associated with utility property at
NJNG.
The
Company is not currently under examination in any state; however, all periods
subsequent to those ended September 30, 2003 are statutorily open to examination
with the exception of New York, in which all periods subsequent to September 30,
2004 are statutorily open to examination. As previously disclosed, NJNG was
party to a case pending before the Tax Court of New Jersey (Tax Court). In that
case, NJNG disputed the State of New Jersey's (State) application of its tax
apportionment rules. On April 15, 2008 the Tax Court issued a decision in favor
of the State. On June 19, 2008, NJNG filed an appeal with the Appellate Division
of the Superior Court of New Jersey. The obligation under this decision, plus
penalties and interest totals approximately $3.1 million, which was previously
fully reserved for under FIN 48. To prevent the accrual of additional interest,
it is expected that NJNG will pay the obligation and convert the filing to a
claim for refund. The effect of the Tax Court's decision will not impact the
Company's effective tax rate, as this amount had been fully reserved for and was
reflected as a component of current Deferred and accrued taxes in the Unaudited
Condensed Consolidated Balance Sheets.
12.
COMMI
TMENTS 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 $98.4 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 June 30, 2008, NJRES had contractual obligations for current demand
charges related to storage contracts and pipeline capacity contracts of $22.7
million and $43.0 million, respectively.
As of
June 30, 2008, there were NJR guarantees covering approximately $443 million of
natural gas purchases and demand fee commitments of NJRES and NJNG not yet
reflected in Accounts payable on the Unaudited Condensed Consolidated Balance
Sheet. Commitments as of June 30, 2008 for natural gas purchases and
future
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
demand
fees, for the next five fiscal year periods, are as follows:
(Thousands)
2008
2009
2010
2011
2012
Thereafter
NJRES
Natural
      gas purchases
$303,137
$479,657
$189,877
$       —
$       —
$         —
Storage
      demand fees
7,465
19,489
11,520
8,310
5,846
3,022
Pipeline
      demand fees
16,235
32,721
19,107
16,249
6,809
9,017
Sub-total
      NJRES
$326,837
$531,867
$220,504
$24,559
$12,655
$ 12,039
NJNG
Natural
      gas purchases
$116,271
$ 56,802
$ 18,016
$ 1,529
$       —
$         —
Storage
      demand fees
6,123
21,938
22,175
15,563
7,853
11,731
Pipeline
      demand fees
13,733
73,898
81,765
80,441
74,422
156,341
Sub-total
      NJNG
$136,127
$152,638
$121,956
$97,533
$82,275
$168,072
Total
$462,964
$684,505
$342,460
$122,092
$94,930
$180,111
Costs for
storage and pipeline demand fees, included as a component of Gas purchases on
the Unaudited Condensed Consolidated Statements of Income, are as
follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Millions)
2008
2007
2008
2007
NJRES
$29.4
$29.5
$ 
      88.4
$106.9
NJNG
17.9
17.8
56.0
56.0
Total
$47.3
$47.3
$144.4
$162.9
NJNG's
capital expenditures are estimated at $81.8 million for fiscal 2008, of which
approximately $57.2 million has been incurred to date, 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 $3.2 million annually for the next five years and $2.1 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), 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 June 30, 2006. As of June 30, 2008, $87.4 million
of previously incurred remediation costs, net of recoveries from customers and
insurance proceeds, are included in Regulatory assets on the Unaudited Condensed
Consolidated Balance Sheet.
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
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 Unaudited 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
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
Unaudited Condensed Consolidated Statements of Income, 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 investments in energy and mid-stream assets, appliance and
installation services, commercial real estate development and other corporate
activities.
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NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (Continued)
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Operating
      Revenues
Natural
      Gas Distribution
$   179,511
$180,980
$   940,689
$   871,198
Energy
      Services
801,628
476,383
2,009,751
1,540,558
Retail
      and Other
19,344
4,926
38,834
17,117
Subtotal
1,000,483
662,289
2,989,274
2,428,873
Intersegment
      revenues
(1)
(44
)
(71
)
(152
)
(211
)
Total
$
1,000,439
$662,218
$
2,989,122
$2,428,662
Operating
      Income (Loss)
Natural
      Gas Distribution
$       7,552
$    7,562
$     98,365
$   103,014
Energy
      Services
(25,952
)
40,158
(48,692
)
15,587
Retail
      and Other
12,707
(1,172
)
19,506
(952
)
Total
$      (5,693
)
$  46,548
$
69,179
$   117,649
Net
      Income (Loss)
Natural
      Gas Distribution
$          147
$    2,602
$     50,987
$     55,736
Energy
      Services
(15,546
)
23,264
(28,343
)
6,805
Retail
      and Other
7,802
(489
)
12,479
231
Total
$      (7,597
)
$  25,377
$     35,123
$     62,772
(1)
Consists
      of transactions between subsidiaries that are eliminated in
      consolidation.
As of
June 30, 2008, NJRES' assets have increased more than 5 percent as compared to
September 30, 2007, primarily due to higher Accounts receivable balances as a
result of greater volumes and prices of wholesale natural gas sales. NJRES'
Accounts receivable balance as of June 30, 2008 has been fully
collected.
During
the nine months ending June 30, 2008, NJRES had one customer, Hess Corporation,
an investment grade rated corporation, whose sales represented more than 10
percent of its total Operating revenue.
14.
OTH
ER
At June
30, 2008, there were 41,968,713 shares of common stock outstanding, which were
adjusted to include the additional shares distributed on March 3, 2008, as a
result of a 3 for 2 stock split. As of June 30, 2008 the book value per share
was $15.67.
ITEM 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).
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
NJRES
comprises the Energy Services segment. 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.
The
Retail and Other segment includes 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, which is being
jointly developed and constructed with a partner in western Pennsylvania; NJR
Investment, which makes energy-related equity investments; NJR Home Services
(NJRHS), which provides service, sales and installation of appliances;
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 three and nine month periods ended
June 30, 2007 related to a correction in the accounting for certain derivative
financial instruments. See
Note 1. General
in the
Unaudited Condensed Consolidated Financial Statements.
Net
income by business segment is as follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
  30,
(Thousands)
2008
2007
2008
2007
Net
      Income (Loss)
Natural
      Gas Distribution
$      147
(2
)%
$  2,602
10
%
$
      50,987
145
%
$55,736
89
%
Energy
      Services
(15,546
)
205
%
23,264
92
%
(28,343
)
(81
)%
6,805
11
%
Retail
      and Other
7,802
(103
)%
(489
)
(2
)
%
12,479
36
%
231
—
%
Total
$  (7,597
)
100
%
$25,377
100
%
$
      35,123
100
%
$62,772
100
%
NJRES and
NJR Energy account for certain of their 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, for contracts executed on or after 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 and are
reflected in current period results.
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 natural gas
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'
reported 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
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
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 (loss) income in the table above are unrealized (losses) gains in the
Energy Services segment of $(23.6) million, $31.1 million, after taxes, for the
three months ended June 30, 2008 and 2007, respectively, and $(101.2) million
and $(38.6) million, after taxes, for the nine months ended June 30, 2008 and
2007, respectively. Also included in Net (loss) income in the table above are
realized gains and (losses) of $13.7 million, $1.1 million, after taxes, for the
three months ended June 30, 2008 and 2007, respectively, and $15.9 million and
$(0.7) million, after taxes, for the nine months ended June 30, 2008 and 2007,
respectively, which are related to derivative instruments that have settled and
are designed to economically hedge natural gas that is still in storage
inventory.
Included
in Net (loss) income above are unrealized gains (losses) in the Retail and Other
segment of $6.4 million, $(1.9) million, after taxes, for the three months ended
June 30, 2008 and 2007, respectively, and $10.2 million and $(1.6) million,
after taxes, for the nine months ended June 30, 2008 and 2007,
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 in its natural gas
      distribution system, as well as recovery of all prudently incurred costs
      in order to provide safe and reliable service throughout NJNG's service
      territory.
Based
      upon increases in NJNG's operation, 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.
On
      July 30, 2008, NJNG and the Department of Public Advocate, Division
      of Rate Counsel (Rate Counsel) signed an agreement that stipulated the
      principal financial terms of a settlement of its petitioned rate increase.
      Pending final review and approval by the BPU, NJNG would receive a revenue
      increase to its base rates of approximately $32.5 million, which is
      inclusive of an approximate $13 million impact of a change to the
      conservation incentive program baseline usage rate, receive an allowed
      return on equity component of 10.3 percent, reduce its depreciation
      expense component from 3.0 percent to 2.34 percent, and reduce its
      depreciation expense by $1.6 million annually as a result of the
      amortization of previously recovered asset retirement obligations, all of
      which are expected to commence on or about October 1, 2008.
As
      a result of the signed stipulation, NJNG recorded an aggregate after-tax
      charge in the third quarter of fiscal 2008 of approximately $1.5 million,
      as it determined that certain regulatory assets were no longer recoverable
      in future rates from customers (approximately $769,000) and changed its
      computation for its allowance for funds used during construction
      (approximately $744,000).
Ÿ
Working
      with the BPU and 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;
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
Ÿ
Managing
      its new customer growth rate, which is expected to be approximately 1.6
      percent for fiscal 2008;
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' Basic Gas Supply Service (BGSS) rates 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 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
utility gross margin amounts.
In
conjunction with the CIP, NJNG is required to administer programs that promote
customer conservation efforts. As of June 30, 2008 and September 30, 2007, the
obligation to fund these conservation programs was recorded at its present value
of $914,000 and $1.4 million, respectively, on the Unaudited 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. Through June 30, 2008, NJNG has recovered $6.7
million of these previously deferred amounts.
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 of the United
States and Canada.
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
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;
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
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 financial margin; and
Ÿ
Managing
      economic hedging programs that are designed to mitigate adverse market
      price fluctuations in natural gas transportation and storage
      commitments.
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.
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 natural gas at a later date to return 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 transaction 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 its credit exposures with its
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
various
counterparties. 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
are natural gas transportation and storage facilities. NJR believes that
acquiring, owning and developing these mid-stream assets, which operate under a
tariff structure that have either a regulated or market-based rate can provide a
significant growth opportunity for the Company. To that end, NJR has acquired an
interest in Iroquois (regulated rate) and Steckman Ridge (anticipated
market-based rate), 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 148,000
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.
On June
5, 2008, the Federal Energy Regulatory Commission (FERC) issued Steckman Ridge a
certificate of public convenience and necessity authorizing the ownership,
construction and operation of its natural gas storage facility and associated
facilities. It is anticipated that construction on Steckman Ridge will be
completed during the first quarter of fiscal 2010. As of June 30, 2008, NJR has
invested $71.6 million in Steckman Ridge. This amount excludes capitalized
interest and other direct costs. Total project costs related to the development
of the storage facility have been revised from the original estimate of
approximately $250 million to approximately $265 million, of which NJR is
obligated to fund 50 percent, or approximately $132.5 million. NJR anticipates
that Steckman Ridge will be able to secure non-recourse financing upon
completion of the construction and development of its facilities, thereby
potentially reducing the final expected recourse 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
Instruments
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
Unaudited Condensed Consolidated Statements of Income.
In
providing its unregulated wholesale energy services, NJRES 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 settlement accounting.
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ITEM 2. MANAGEMENT'S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      (Continued)
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 and throughout the term of the contract 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 Unaudited Condensed Consolidated Balance Sheet, with changes in fair value
being recorded as a component of Gas purchases in the Unaudited 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 Unaudited 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 Unaudited 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.
If there is any change
in this recovery amount, NJNG would record a charge for the unrecovered portion
on its Unaudited Condensed Consolidated Income Statement.
As
discussed in
Note 2.
Regulation – Filed Base Rate
Case and Signed Stipulation
in the Unaudited Condensed Consolidated
Financial Statements, as part of the agreement that stipulates the terms of a
settlement of NJNG's petitioned rate increase, NJNG agreed to change its
computation of AFUDC for fiscal year 2008. As a result of this agreement, NJNG
recorded a post-tax aggregate charge of approximately $744,000 in the third
quarter of fiscal 2008. This charge represents the aggregate adjustment of
previously recorded equity component amounts under its AFUDC calculation and
recording deferred interest costs as its sole component of AFUDC through June
30, 2008 as a result of the disallowance of the equity component. NJNG
anticipates that, as rates are approved by the BPU as outlined in the
stipulation agreement, that its AFUDC calculation, effective October 1, 2008,
would include both a debt component and an equity component. The equity
component portion of the calculation would be based on an allowed fixed equity
rate, applicable only during periods when its short-term debt balances are lower
than its construction work-in-progress balances.
Recently
Issued Accounting Standards
Refer to
Note 1. General
in the
Unaudited Condensed Consolidated Financial Statements, for discussion of
recently issued accounting standards.
Results
of Operations
Consolidated
Net loss
for the quarter ended June 30, 2008 was $(7.6) million, compared with net income
of $25.4 million for the same period last fiscal year. Basic and diluted
earnings per share (EPS) decreased to a loss per share of $(0.18), compared with
earnings per share of $0.60 for the same period last fiscal year.
Net
income for the nine months ended June 30, 2008, decreased 44.0 percent to $35.1
million, compared with $62.8 million for the same period last fiscal year. Basic
EPS decreased 44.0 percent to $0.84, compared with $1.50 for the same period
last fiscal year, and diluted EPS decreased 43.6 percent to $0.84, compared with
$1.49 for the same period last fiscal year.
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
Prior
period basic and diluted earnings per share noted above have been retroactively
adjusted to reflect NJR's 3 for 2 stock split distributed on March 3,
2008.
The
decrease in earnings for the three months ended June 30, 2008, as compared with
the same period in the prior fiscal year, was due primarily to increased gas
purchases costs at NJRES, primarily driven by unrealized losses in its financial
and physical contracts, offset by unrealized gains at NJREC, lower aggregate
interest costs, and a tax benefit associated with a state tax rate change at
NJRES. For the nine months ended June 30, 2008, the decrease in earnings as
compared with the same period in the prior fiscal year was due primarily to the
same factors noted above.
The
Company's Operating revenues and Gas purchases are as follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
($
      in Thousands)
2008
2007
%
Change
2008
2007
%
Change
Operating
      revenues
$1,000,439
$662,218
51.1
%
$2,989,122
$2,428,662
23.1
%
Gas
      purchases
$   945,629
$554,917
70.4
%
$2,696,248
$2,099,898
28.4
%
Operating
revenues increased $338.2 million during the three months ended June 30, 2008,
compared with the same period of the prior fiscal year due primarily to an
increase in transaction volume at NJRES, as well as moderate increases in
customer growth and greater off-system sales, partially offset by reduced
customer usage at NJNG. For the nine months ended June 30, 2008, Operating
revenues increased $560.5 million compared with the same period of the prior
fiscal year due primarily to the same factors that were noted
above.
The
factors that resulted in the increase in revenues described above similarly
affected an increase of $391.0 million and $596.4 million in Gas purchases for
the three and nine months ended June 30, 2008, respectively, as compared with
the same periods in the prior fiscal year.
Natural
Gas Distribution Operations
NJNG is a
local natural gas distribution company that provides regulated retail energy
services to approximately 483,000 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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      OF OPERATIONS (Continued)
NJNG's
financial results are as follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Utility
      Gross Margin
Operating
      revenues
$179,511
$180,980
$940,689
$871,198
Less:
Gas
      purchases
125,060
124,867
653,196
588,723
Energy
      and other taxes
9,031
9,899
53,137
51,197
Regulatory
      rider expense
5,925
6,226
35,879
33,827
Total
      Utility Gross Margin
$  39,495
$  39,988
$198,477
$197,451
Utility
      Gross Margin
Residential
      and commercial
$  33,535
$
      33,405
$178,145
$176,619
Transportation
4,639
4,159
15,438
13,906
Total
      Utility Firm Gross Margin
38,174
37,564
193,583
190,525
Incentive
      programs
1,225
2,242
4,836
6,426
Interruptible
96
182
358
500
BPU
      settlement (included in Gas purchases above)
—
—
(300
)
—
Total
      Utility Gross Margin
39,495
39,988
198,477
197,451
Operation
      and maintenance expense
21,637
22,716
69,417
65,663
Depreciation
      and amortization
9,488
8,940
28,053
26,526
Other
      taxes not reflected in utility gross margin
818
770
2,642
2,248
Operating
      Income
$    7,552
$    7,562
$  98,365
$103,014
Other
      income
(41
)
772
2,641
2,657
Interest
      expense, net
4,146
4,700
15,641
15,337
Income
      tax provision
3,218
1,032
34,378
34,598
Net
      Income
$       147
$    2,602
$  50,987
$  55,736
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, and may not be comparable to the definition of gross
margin used by others in the natural gas distribution business and other
industries. Utility gross margin is comprised of three major categories which
include utility firm gross margin, incentive programs and utility gross margin
from interruptible customers. 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.
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 Unaudited 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.
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      OF OPERATIONS (Continued)
NJNG's
Operating revenues decreased by $1.5 million, or 0.8 percent, and Gas purchases
increased by $193,000, or 0.2 percent, for the three months ended June 30, 2008,
respectively, compared with same period in the prior fiscal year as a result
of:
Ÿ
a
      decrease for both Operating revenue and Gas purchases related to firm
      sales in the amount of $12.4 million, which was the result of lower
      volumes and a decrease in the average BGSS rate to $0.975 per therm in the
      third quarter of fiscal 2008 as compared with $1.0256 per therm in the
      third quarter of fiscal 2007;
Ÿ
offset
      by an increase in Operating revenue and Gas purchases related to
      off-system sales in the amount of $7.5 million and $7.4 million,
      respectively, as a result of increased sales prices of 45 percent to
      $11.845 per dekatherm (dth) for the three months ending June 30, 2008 as
      compared to $8.167 per dth for the three months ending June 30, 2007 as a
      result of the change in the wholesale price of natural
  gas;
Ÿ
an
      increase in Operating revenue and Gas purchases related to storage
      incentive revenue in the amount of $1.5 million and $2.4 million,
      respectively, as a result of opportunities available in the wholesale
      energy market; and
Ÿ
an
      increase in both Operating revenue and Gas purchases related to
      interruptible sales in the amount of $1.3 million, due to an increase in
      sales to electric co-generation
customers.
NJNG's
Operating revenues increased by $69.5 million, or 8.0 percent, and Gas purchases
increased by $64.5 million, or 11.0 percent, respectively, for the nine months
ended June 30, 2008, compared with the same period in the prior fiscal year,
primarily as a result of:
Ÿ
an
      increase in Operating revenue and Gas purchases related to off-system
      sales in the amount of $46.3 million and $44.6 million, respectively, as a
      result of the change in the wholesale price of natural
  gas;
Ÿ
a
      reduction in BGSS customer refunds provided to residential and small
      commercial customers of $44.3 million, inclusive of sales tax refunds of
      $2.9 million. For the nine months ended June 30, 2008 BGSS customer
      refunds were $32.1 million, as compared to the same period in the prior
      fiscal year of $76.4 million. These customer refunds were the result of
      anticipated reductions in cost to acquire wholesale natural gas, as
      compared to the current established rate included in NJNG's BGSS
      tariff;
Ÿ
an
      increase of $5.0 million in Operating revenue due an increase of the
      amounts accrued through the CIP program as a result of lower customer
      usage, as described below;
Ÿ
an
      increase in Operating revenue and Gas purchases related to interruptible
      sales in the amount of $3.9 million and $3.6 million, respectively, due to
      an increase in sales to electric co-generation
  customers;
Ÿ
an
      increase in Operating revenue and Gas purchases related to storage
      incentive revenue in the amount of $1.5 million and $3.8 million,
      respectively, as a result of opportunities available in the wholesale
      energy market;
Ÿ
an
      increase in Gas purchases of $300,000 as a result of a non-recurring
      charge to the BGSS associated with a settlement agreement related to a
      BGSS filing for fiscal 2007;
Ÿ
an
      increase in Gas purchases of $1.0 million related to decreased amounts
      received through capacity release and FRM of $559,000 in fiscal 2008 as
      compared to $1.6 million in fiscal 2007; partially offset
    by
Ÿ
a
      decrease in firm sales of $31.4 million for both Operating revenue and Gas
      purchases as a result of a decrease in therms sold as well as the average
      BGSS price per therm.
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      OF OPERATIONS (Continued)
Sales tax
and TEFA, which are presented as both components of Revenues and Operating
Expenses in the Unaudited Condensed Consolidated Statements of Income, totaled
$9.0 million and $9.9 million and $53.1 million and $51.2 million for the three
and nine months ended, June 30, 2008 and 2007, respectively. For the three
months ended June 30, 2008, sales tax and TEFA decreased due primarily to a
decrease in customer usage. For the nine months ended June 30, 2008, sales tax
increased as a result of the increase in Operating revenue, as compared to the
same period in the prior fiscal year.
Regulatory
rider expenses totaled $5.9 million and $6.2 million and $35.9 million and $33.8
million for the three and nine months ended June 30, 2008 and 2007,
respectively. As Regulatory rider expenses are calculated on a per-therm basis,
the decrease in Regulatory rider expenses for the three months ended June 30,
2008 compared with the same period in the prior fiscal year is a result of a
decrease in sales offset by an increase in the rider rate charged to customers.
The increase in Regulatory rider expenses for the nine months ended June 30,
2008 over the same period in the prior fiscal year is a result of an increase in
the rider rate charged offset by a decrease in therms sold to customers as a
result of reduced usage.
Utility
Firm Gross Margin
Utility
firm gross margin is earned from residential and commercial customers who
receive natural gas service from NJNG through either sales or transportation
tariffs.
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.
Total
utility firm gross margin increased $610,000, or 1.6 percent, for the three
months, and $3.1 million, or 1.6 percent, for the nine months ended, June 30,
2008, compared with the same periods in the prior fiscal year. The changes were
due primarily to an increase in firm and transport customers of 3,800 and 2,000,
respectively over the same period in the prior fiscal year. Gross margin
associated with firm customers increased $130,000 and $1.5 million for the three
and nine months ended June 30, 2008, respectively, as compared to the same
period in the prior fiscal year.
Gross
margin associated with transportation customers increased $480,000, or 11.5
percent, for the three months ended June 30, 2008, and $1.5 million or 11.0
percent for the nine months ended June 30, 2008, respectively, compared with the
same periods in the prior fiscal year. NJNG transported 1.4 Bcf and 1.5 Bcf for
the three months ended June 30, 2008 and 2007, respectively, and 8.0 Bcf and 7.8
Bcf for the nine months ended June 30, 2008 and 2007, respectively. The increase
in utility firm gross margin was due primarily to an increase of 2,000
transportation customers over the same period in the prior fiscal
year.
The
weather for the three months ended June 30, 2008 was 15.6 percent warmer than
normal, which resulted in an accrual of utility gross margin under the CIP of
$1.7 million, compared with 15.1 percent warmer than normal weather for the same
period last fiscal year, which resulted in a reduction of the accrual of utility
gross margin under the CIP of $225,000. The weather for the nine months ended
June 30, 2008 was 8.3 percent warmer than normal,
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which
resulted in an accrual of utility gross margin under the CIP of $9.1 million,
compared with 1.6 percent warmer than normal weather for the same period last
fiscal year, which resulted in an accrual of utility gross margin of $8.2
million. Under the provisions of the CIP, accruals related to the weather
portion are dependent on the occurrence of degree days and the magnitude of the
variance in relation to the normal degree day.
Customer
usage was lower than the established benchmark during the nine months ended June
30, 2008, which resulted in an additional accrual of utility gross margin under
the CIP of $11.5 million compared with $7.4 million for the same period in
fiscal 2007.NJNG had 10,697 and 9,197 residential customers and 5,179 and 4,637
commercial customers using its transportation service at June 30, 2008 and 2007,
respectively. The increase in transportation customers was due primarily to an
increase in marketing activity by third party natural gas service providers in
NJNG's service territory.
NJNG
added 4,896 and 5,645 new customers during the nine months ended June 30, 2008
and 2007, respectively. In addition, NJNG converted 505 and 357 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 0.67 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 economically
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 established with the purchase of a portfolio of futures contracts
applicable to the April-through-October injection season, which is established
by the BPU.
NJNG's
incentive programs totaled 5.6 Bcf and generated $1.2 million of utility gross
margin for the three months ended June 30, 2008, compared with 6.6 Bcf and $2.2
million of utility gross margin in the same period in the prior fiscal year. For
the three month period ended June 30, 2008, the decrease is due primarily to the
decrease in margin associated with the storage program as a result of timing
variations of storage incentive transactions.
NJNG's
incentive programs totaled 26.8 Bcf and generated $4.8 million of utility gross
margin for the nine months ended June 30, 2008, compared with 26.9 Bcf and $6.4
million of utility gross margin, for the same period in the prior fiscal year.
For the nine month period ended June 30, 2008, the decrease in incentive program
was due primarily to:
Ÿ
a
      decrease in margin from the storage incentive program as a result of
      timing variations of storage incentive transactions; partially offset
      by
Ÿ
more
      favorable market spreads, which resulted in an increase in off-system
      sales margin.
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      OF OPERATIONS (Continued)
New York
Mercantile Exchange (NYMEX) settlement prices for natural gas are a general
indication of the monthly market movements. NYMEX prices have increased to an
average of $8.641/dth for the nine months ended June 30, 2008 from $6.959/dth
for the nine months ended June 30, 2007, which represents a 24.2 percent
increase, while the average off-system price was higher by 29.1 percent at an
average of $10.050/dth for the nine months ended June 30, 2008 from an average
of $7.786/dth for the nine months ended June 30, 2007.
Interruptible
and Tariff Revenues
As of
June 30, 2008, NJNG serves 46 customers through interruptible sales and/or
transportation tariffs. Interruptible customers are those customers whose
service can be temporarily halted as they have the ability to utilize an
alternate fuel source. Although therms sold and transported to interruptible
customers represented 5 percent of total throughput for the nine months ended
June 30, 2008, and 4 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 as a result of the natural gas commodity cost being the
largest component of the sales price.
Interruptible
sales were 1.7 Bcf and 1.1 Bcf for the nine months ended June 30, 2008, and
2007, respectively. In addition, NJNG transported 2.5 Bcf and 2.3 Bcf for the
nine months ended June 30, 2008 and 2007, respectively, for its interruptible
customers.
An
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 (O&M) expense decreased $1.1 million, or 4.7 percent, for
the three months ended June 30, 2008, compared with the same period in the prior
fiscal year. The decrease was due primarily to:
Ÿ
a
      $1.4 million credit as a result of adjusting accrued medical premium
      expenses to reflect lower costs based on actual claims;
Ÿ
lower
      pipeline integrity costs of $722,000; partially offset
  by
Ÿ
higher
      compensation costs of $920,000 as a result of an increase in the number of
      employees and overtime labor as well as annual wage
    increases.
Operation
and maintenance expense increased $3.8 million, or 5.7 percent, for the nine
months ended June 30, 2008, compared with the same period in the prior fiscal
year. The increase was due primarily to:
Ÿ
higher
      compensation costs of $4.2 million as a result of an increase in the
      number of employees and overtime labor as well as annual wage
      increases;
Ÿ
an
      increase in materials and supplies expense of $560,000 due primarily to an
      increase in high pressure meter relocations and a greater number of meter
      exchanges on non-standard residential meters;
Ÿ
an
      increase of $1.1 million due primarily to an increase in NJNG's shared
      services expenses, including labor costs and consulting fees related to
      various tax positions; partially offset by
Ÿ
a
      $1.4 million credit as a result of adjusting accrued medical premium
      expenses to reflect lower costs based on actual claims;
  and
Ÿ
lower
      pipeline integrity costs of
$885,000.
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      OF OPERATIONS (Continued)
Operating
Income
Operating
income remained constant at $7.6 million for the three months ended June 30,
2008, compared with the same period in the prior fiscal year.
Operating
income decreased $4.6 million, or 4.5 percent, for the nine months ended June
30, 2008, compared with the same period in the prior fiscal year. The decrease
was due primarily to:
Ÿ
an
      increase in Operation and maintenance expenses of $3.8 million, as
      discussed above;
Ÿ
an
      increase in Depreciation expense of $1.5 million, as a result of greater
      utility plant being placed into service; partially offset
    by
Ÿ
an
      increase in total Utility gross margin of $1.0 million, as discussed
      above.
Interest
Expense
Interest
expense decreased $554,000 for the three months ended June 30, 2008, as compared
to the same period in the prior fiscal year, due primarily to:
Ÿ
a
      decrease of $757,000 due to a lower average interest rate of 2.3 percent
      on commercial paper borrowings as compared with 5.3 percent and lower
      short-term borrowings;
Ÿ
a
      decrease in BGSS interest of $714,000, as a result of no overrecovered gas
      costs;
Ÿ
a
      decrease of $220,000, which includes a year to date adjustment of $429,000
      related to a change in the calculation of AFUDC (see
Note 2.
Regulation
in the
      Unaudited Condensed Consolidated Financial Statements – Filed Base Rate
      Case and Signed Stipulation); partially offset by
Ÿ
an
      increase of $278,000 in interest related to NJNG's variable rate debt,
      which is correlated to the auction rate securities issued by the Economic
      Development Authority of New Jersey (EDA), as a result of higher interest
      rates due primarily to reduced liquidity in the credit markets along with
      maximum rates being set for the auction rate securities that
      failed;
Ÿ
an
      increase of $928,000 for interest on fixed rate borrowings mostly related
      to NJNG's issuance of the $125 million notes due May 2018 which carry an
      interest rate of 5.6 percent.
Interest
expense increased $304,000 for the nine months ended June 30, 2008, as compared
to the same period in the prior fiscal year, due primarily to:
Ÿ
an
      increase of $1.0 million for interest on fixed rate borrowings mostly
      related to NJNG's issuance of the $125 million senior notes due May 2018,
      as described above;
Ÿ
an
      increase of $679,000 in interest related to NJNG's variable rate debt, as
      a result of higher interest rates as described above;
Ÿ
an
      increase of $187,000 associated with lower amounts of capitalized
      interest, based on lower short-term borrowing costs; partially offset
      by
Ÿ
a
      decrease of $1.1 million driven by a lower average interest rate of 3.6
      percent on NJNG's commercial paper borrowings compared to 5.3 percent in
      the prior year;
Ÿ
a
      decrease in BGSS interest of $560,000, due to the absence of overrecovered
      gas costs from customers as a result of wholesale commodity prices for
      natural gas being in excess of allowed amounts included in
      rates.
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      OF OPERATIONS (Continued)
Net
Income
Net
income decreased $2.5 million, or 94.4 percent for the three months ended June
30, 2008 as compared with the same period in the prior fiscal year, due
primarily to a one-time net after-tax charge of $0.98 million to correct a tax
position surrounding utility property and approximately $1.5 million in
after-tax charges related to the signed agreement surrounding the stipulation of
NJNG's base rate case filing as discussed in
Note 2.
Regulation – Filed Base Rate Case
and Signed Stipulation
in the Unaudited Condensed Consolidated Financial
Statements. Of this $1.5 million after-tax charge, approximately $0.7 million
represents an aggregate change in the computation of AFUDC and $0.8 million
represents the estimated non-recovery of previously deferred costs.
Net
income decreased $4.8 million, or 8.5 percent, for the nine months ended June
30, 2008, as compared with the same period in the prior fiscal year, due
primarily to a decrease in Operating income of approximately $4.6 million as
discussed above, partially offset by lower income tax expense of $0.8 million as
a result of the lower Operating income, offset by the one-time charge related to
the correction of a tax position as noted above.
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 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 establish economic hedges that 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 not to use the normal purchase normal sale scope exception of SFAS 133,
and records these physical commodity contracts at fair value on the Unaudited
Condensed Consolidated Balance Sheets. All changes in the fair value of physical
commodity contracts entered into subsequent to September 30, 2007 are recorded
as part of Gas purchases in the Unaudited 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 Unaudited 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 Gas
purchases in the Unaudited Condensed Consolidated Statements of Income 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
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      OF OPERATIONS (Continued)
placed
into storage, to be sold at a later date, settle and result in realized gains,
which are also recorded as a component of Gas purchases in the Unaudited
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. These are normally varying over one to five years.
NJRES'
financial results are summarized as follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Operating
      revenues
$801,628
$476,383
$2,009,751
$1,540,558
Gas
      purchases
820,568
430,050
2,043,051
1,511,175
Gross
      (loss) margin
(18,940
)
46,333
(33,300
)
29,383
Operation
      and maintenance expense
6,811
5,967
14,677
13,120
Depreciation
      and amortization
50
53
156
161
Other
      taxes
151
155
559
515
Operating
      (loss) income
(25,952
)
40,158
(48,692
)
15,587
Other
      income
92
228
244
343
Interest
      expense, net
738
256
2,502
3,283
Income
      tax benefit
(11,052
)
16,866
(22,607
)
5,842
Net
      (loss) income
$(15,546
)
$  23,264
$    (28,343
)
$       6,805
NJRES
records its financial derivative instruments using fair market values. The
mark-to-market changes on these financial instruments are reflected as a
component of Gas purchases in the Unaudited Condensed Consolidated Income
Statement. As of June 30, 2008, NJRES' portfolio of financial derivatives
instruments totaled 72.4 Bcf of net short positions, with an average portfolio
price of $11.60 per dth. NJRES' portfolio at June 30, 2007 was also in a net
short position, which totaled 83.0 Bcf and had an average portfolio price of
$8.29 per dth. A portfolio of net short positions is subject to unrealized
losses during periods of rising market prices.
NJRES had
a gross loss of $18.9 million and gross margin of $46.3 million for the three
months ended June 30, 2008 and 2007, respectively. The decrease in gross margin
of approximately 141 percent is due primarily to losses stemming from financial
derivatives that were impacted by higher commodity market prices for natural
gas. NJRES incurred realized gains of $22.4 million and unrealized losses of
$38.7 million in the current fiscal period, as compared to realized and
unrealized gains of $1.8 million and $53.5 million, respectively, in the prior
fiscal period. These gains and losses were incurred by NJRES' portfolio mix of
open financial derivative positions, which are utilized to provide an economic
hedge, in order to secure a fixed price on forecasted natural gas storage
injections and withdrawals. The average market price on these positions within
NJRES' portfolio increased by approximately 32 percent, from $10.06 per dth as
of March 31, 2008 to $13.30 per dth as of June 30, 2008, whereas during the same
period in the prior fiscal year the positions experienced price decreases of
approximately 9 percent.
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
NJRES had
a gross loss of $33.3 million and gross margin of $29.4 million for the nine
months ended June 30, 2008 and 2007, respectively. The decrease in gross margin
of approximately 214 percent is due primarily to increasing market prices for
natural gas, which resulted in unrealized losses on its financial instruments.
The financial derivatives incurred aggregate realized gains of $26.1 million and
unrealized losses of $165.8 million, respectively, for the nine months ended
June 30, 2008 as compared to realized and unrealized losses of $1.2 million and
$64.4 million, respectively, in the prior fiscal period. The financial
derivatives that comprise NJRES' portfolios are designed to offset a majority of
the commodity price risk, by providing an economic hedge for forecasted physical
gas transactions. NJRES' current portfolio mix of net short financial
derivatives is subject to unrealized losses during periods of rising market
prices for natural gas. The average market price on the positions within NJRES'
portfolio increased by approximately 77 percent, from $7.52 per dth as of
September 30, 2007 to $13.30 per dth as of June 30, 2008.
As part
of its lower net loss, NJRES' state income tax benefit decreased due to a
reduction in its effective state income tax, fully offset by revaluing its
beginning of the fiscal year deferred tax liabilities by the lower effective
state tax rate, which resulted in a benefit of approximately $1.7 million. The
reduction in the rate is due to a change in the apportionment of its taxable
income for state tax purposes. These changes and revaluation of deferred tax
liabilities resulted in an effective tax benefit of 44.3 percent for the nine
months ended June 30, 2008 as compared to an effective tax benefit of 41.1
percent for the nine months ended June 30, 2007.
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 from its storage inventory. 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.
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      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
The
following table is a computation of financial margin of NJRES:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Operating
      revenues
$801,628
$476,383
$2,009,751
$1,540,558
Less:
      Gas purchases
820,568
430,050
2,043,051
1,511,175
Add:
Unrealized
      loss (gain) on derivative instruments
38,714
(53,459
)
165,757
64,408
Net
      realized (gain) loss from derivative instruments related to natural gas
      inventory
(22,428
)
(1,802
)
(26,057
)
1,158
Financial
      margin
$   (2,654
)
$  (8,928
)
$   106,400
$     94,949
A
reconciliation of Operating loss, the closest GAAP financial measurement, to the
Financial margin of NJRES is as follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Operating
      (loss) income
$(25,952
)
$40,158
$(48,692
)
$15,587
Add:
Operation
      and maintenance expense
6,811
5,967
14,677
13,120
Depreciation
      and amortization
50
53
156
161
Other
      taxes
151
155
559
515
Subtotal
      – Gross (loss) margin
$(18,940
)
$46,333
$(33,300
)
$29,383
Add:
Unrealized
      loss (gain) on derivative instruments
38,714
(53,459
)
165,757
64,408
Net
      realized (gain) loss from derivative instruments related to natural gas
      inventory
(22,428
)
(1,802
)
(26,057
)
1,158
Financial
      (loss) margin
$  (2,654
)
$
      (8,928
)
$106,400
$94,949
A
reconciliation of Net (loss) income to Net financial (loss) earnings is as
follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Net
      (loss) income
$(15,546
)
$
      23,264
$(28,343
)
$  6,805
Add:
Unrealized
      loss (gain) on derivative instruments, net of taxes
23,599
(31,117
)
101,222
38,597
Realized
      (gain) loss from derivative instruments related to natural gas inventory,
      net of taxes
(13,683
)
(1,062
)
(15,900
)
682
Net
      financial (loss) earnings
$  (5,630
)
$  (8,915
)
$  56,979
$46,084
NJRES had
a financial loss of $2.7 million and $8.9 million for the three months ended
June 30, 2008 and 2007, respectively. The $6.2 million reduction in net
financial losses compared with the prior fiscal period is due primarily to
improved margins of $8.9 million on natural gas storage transactions that
stemmed from warmer than normal weather in the Northeast market regions during
the current fiscal quarter. The warmer weather prompted market prices to
increase, resulting in more favorable storage spreads that averaged
approximately $0.173 per dth in the current fiscal period, as compared to $0.097
per dth in the prior fiscal period. Storage withdrawal volumes were also higher
during the current fiscal period, which decreased storage levels by 5.8 Bcf to
an ending balance of 20.8
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
Bcf.
Additionally, NJRES experienced higher margins on its transport capacity serving
the Northeast market area during the month of June 2008, which had warmer than
normal temperatures in the region. These favorable margins were the result of
increased demand levels from electric cogeneration facilities, which were
purchasing higher volumes of natural gas, as a fuel source, in order to
accommodate their additional electric generation requirements during the month.
The reduction in net financial loss was partially offset by higher losses from
basis positions, which posted $3.5 million of additional losses in the current
fiscal period as compared to prior fiscal period. The higher losses from basis
positions were due primarily to increased demand costs of approximately $4.8
million over the prior fiscal period, that were associated with additional
transport capacity acquired during the first fiscal quarter, as well as,
fewer arbitrage opportunities due to overall market conditions within NJRES'
business regions.
NJRES'
financial margin increased $11.4 million for the nine months ended June 30,
2008, compared with the same period last fiscal year. The increase in financial
margin was due primarily to the acquisition of additional transport contracts
for the Northeast market region during the first quarter of fiscal 2008. The
additional transport contracts enabled NJRES to transact greater volumes in the
market region, which experienced favorable spreads that contributed to higher
margins. The overall increase in financial margin was partially offset by lower
spreads on storage assets, which decreased in the current fiscal year as
compared to prior fiscal year, when during the month of February 2007, optimal
pricing conditions enabled NJRES to transact a significant volume of favorable
storage spreads that contributed to higher margins. The average spread on
storage positions decreased from $0.710 per dth in the prior fiscal year period
to $0.422 per dth in the current fiscal year period.
NJRES'
Operation and maintenance expense increased by $844,000 and $1.6 million for the
three and nine months ended June 30, 2008, respectively, compared with the same
periods last fiscal year. The increases were due primarily to higher
compensation costs as a result of higher salary and accrued incentive costs and
increased accounting fees, support expenses and charitable
contributions.
Contributing
to greater net financial earnings is a reduction of $1.8 million in state income
tax expense as a result of a reduction in NJRES' effective state income tax
rate. The reduction in the rate is due to a change in the apportionment of its
taxable income for state tax purposes. The new rate also resulted in a one time
current period benefit of approximately $1.7 million from the effect of
revaluing its deferred tax liabilities at the beginning of the fiscal year. As a
result of this state income tax rate change and the revaluation of its deferred
tax liabilities, NJRES had an effective rate of 37.8 percent for the nine months
ended June 30, 2008 compared with 41.1 percent for the nine months ended June
30, 2007. Excluding the $1.7 million one-time benefit, the effective tax rate
was 38.9 percent.
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.
Retail
and Other Operations
The
consolidated financial results of Retail and Other are summarized as
follows:
Three
      Months Ended
June
      30,
Nine
      Months Ended
June
      30,
(Thousands)
2008
2007
2008
2007
Operating
      revenues
$19,344
$4,926
$38,834
$17,117
Operation
      and maintenance expense
$  5,892
$5,286
$17,030
$15,839
Equity
      in earnings, net of tax
$     378
$   407
$  1,548
$  1,302
Net
      income (loss)
$  7,802
$  (489
)
$12,479
$     231
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
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
derivative
financial instruments (futures contracts) designed to economically hedge the
long-term fixed-price contract.
The
results of operations include unrealized gains (losses) associated with these
derivative instruments of $10.9 million and $(3.1) million, for the three months
ended June 30, 2008 and 2007, respectively, which are recorded, pre-tax, as a
component of Operating revenues. On an after-tax basis, these unrealized gains
(losses) are $6.4 million and $(1.9) million for the three months ended June 30,
2008 and 2007, respectively.
For the
nine month period, unrealized gains (losses) associated with these derivative
instruments are $17.4 million and $(2.8) million, for June 30, 2008 and 2007,
respectively. On an after-tax basis, these unrealized gains (losses) are $10.2
million and $(1.6) million for the nine months ended June 30, 2008 and 2007,
respectively.
Operating
revenue for the three months and nine months ended June 30, 2008, increased
$14.4 million and $21.7 million, respectively as compared to last fiscal year,
due primarily to greater unrealized gains at NJR Energy, which were the result
of an increase in average market prices, partially offset by partial settlement
of these swap contracts. The portfolio of swaps is comprised primarily of long
positions, which increase in value during periods of rising market
prices.
Operation
and maintenance expenses for the three months and the nine months ended June 30,
2008, increased $606,000 and $1.2 million, respectively compared with last
fiscal year due primarily to due to higher compensation costs resulting from an
increase in the number of employees as well as annual wage
increases.
Taxes
netted in Equity in earnings from Iroquois are $264,000 and $270,000 and are
included in the Unaudited Condensed Consolidated Statements of Income for the
three months ended June 30, 2008 and 2007, respectively. For the nine months
ended June 30, 2008 and 2007 taxes netted in Equity in earnings from Iroquois
are $1.0 million and $863,000, respectively and are included in the Unaudited
Condensed Consolidated Statements of Income. 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 and nine months ended June 30, 2008, increased $8.3
million and $12.2 million, respectively compared with the same periods in fiscal
2007 due primarily to the increased operating revenue at NJR Energy, as
previously discussed and increased earnings from the investment in
Iroquois.
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.
NJR's
consolidated capital structure was as follows:
June
      30,
September
      30,
2008
2007
Common
      stock equity
51
%
50
%
Long-term
      debt
38
30
Short-term
      debt
11
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.
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
On
January 23, 2008, NJR's Board of Directors approved a 3 for 2 stock split in the
form of a dividend for the Company's common stock shareholders of record on
February 8, 2008. The additional shares were issued on March 3, 2008 resulting
in an increase in average shares outstanding from approximately 28 million to
approximately 42 million.
The
Company has a share repurchase program that provides for the repurchase of up to
6.8 million shares on a split adjusted basis. As of June 30, 2008, the Company
repurchased approximately 5.4 million of those shares and has the ability to
repurchase an additional 1.4 million shares under the approved
program.
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
June 30, 2008, NJR, NJRES and NJNG had committed credit facilities of $605
million with approximately $494.6 million available under these facilities (see
Note 6. Debt
in the
Unaudited Condensed Consolidated Financial Statements).
NJR
believes that as of June 30, 2008, NJR, NJNG and NJRES were, and currently are,
in compliance with all debt covenants.
NJR
believes that its existing borrowing availability and cash flow from operations
will be sufficient to satisfy its 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 and from the Company's DRP.
NJR
On
December 13, 2007, NJR refinanced its prior senior credit facility, which was
scheduled to expire on December 16, 2007, for a new $325 million, five-year,
revolving, unsecured credit facility. The new credit facility permits the
borrowing of revolving loans and swing loans, as well as the issuance of letters
of credit. Swing loans are loans made available on a same day basis for an
aggregate principal amount of up to $50 million and repayable in full within a
maximum of 7 days of borrowing. 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. Borrowings under the new 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 used the initial
borrowings under the new credit facility to refinance its prior credit facility
and pay all related fees and expenses. In addition, certain of NJR's
non-regulated subsidiaries have guaranteed to the lenders all of NJR's
obligations under the new credit facility.
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 June 30, 2008,
NJR's effective rate was 2.7 percent on outstanding borrowings of $109.9 million
under this credit facility.
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.
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ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
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 no commercial paper outstanding as of June 30, 2008 compared to
$175.7 million as of September 30, 2007.
NJNG has
a 3-year, $30 million uncommitted credit facility with a multinational financial
institution. As of June 30, 2008, NJNG had no borrowings outstanding under this
facility.
In May
2008, NJNG issued $125 million of 5.6 percent senior notes due May 15, 2018 in
the private placement market pursuant to a note purchase agreement. The notes
are secured until the release date (which is the date at which the security
provided by the pledge under NJNG's mortgage indenture would no longer be
available to holders of any outstanding series of NJNG's senior secured notes
and such indebtedness would become senior unsecured indebtedness) by an equal
amount of NJNG first mortgage bonds (Series LL), and interest is payable on the
Notes semi-annually. The proceeds from the notes were used to refinance or
retire short-term debt and will fund capital expenditure
requirements.
NJNG is
obligated with respect to loan agreements securing six series of variable rate
bonds totaling approximately $97.0 million of variable-rate debt backed by
securities issued by the New Jersey Economic Development Authority (EDA). The
EDA bonds are commonly referred to as auction rate securities (ARS) and have an
interest rate reset every 7 or 35 days, depending upon the applicable series,
when an auction is held for the purposes of determining the interest rate of the
securities. The interest rate associated with the NJNG variable-rate debt is
based on the rates on the EDA ARS. As of June 30, 2008, most of the auctions
surrounding the EDA ARS have failed, resulting in those bonds bearing interest
at their maximum rates, as defined in the EDA ARS, as the lesser of (i) 175
percent of 30-day LIBOR or (ii) 10 to 12 percent per annum, as applicable to
such series of ARS. As of June 30, 2008, the 30-day LIBOR rate was 2.5 percent.
While the failure of the ARS auctions does not signify or constitute a default
on NJNG, the EDA ARS does impact NJNG's borrowing costs of the variable-rate
debt. As such, NJNG currently has a weighted average interest rate of 4.1
percent as of June 30, 2008, compared with a weighted average interest rate of
3.9 percent as of September 30, 2007. There can be no assurance that the EDA ARS
will have enough market liquidity to return interest rates below their maximum
rate.
Neither
NJNG nor its assets are obligated or pledged to support the NJR or NJRES
facilities.
NJRES
As of
June 30, 2008 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 June 30, 2008.
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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 June 30,
2008.
(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)
$   732,750
$     77,620
$  61,627
$  39,908
$553,595
Capital
      lease obligations
(1)
87,011
8,813
18,015
18,410
41,773
Operating
      leases
10,039
2,913
3,672
1,489
1,965
Short-term
      debt
(1)
109,900
109,900
—
—
—
New
      Jersey Clean Energy Program
(1)
4,186
4,186
—
—
—
Construction
      obligations
2,672
2,672
—
—
—
Obligations
      for uncertain tax positions
(1)
      (2)
3,130
3,130
—
—
—
Remediation
      expenditures
(3)
105,340
19,000
17,900
10,200
58,240
Natural
      gas supply purchase obligations–NJNG
192,618
168,530
24,088
—
—
Demand
      fee commitments - NJNG
565,983
98,357
202,561
163,078
101,987
Natural
      gas supply purchase obligations–NJRES
972,671
676,294
296,377
—
—
Demand
      fee commitments - NJRES
155,790
65,729
60,308
22,525
7,228
Total
      contractual cash obligations
$2,942,090
$1,237,144
$684,548
$255,610
$764,788
(1)
These
      obligations include an interest component, as defined under the related
      governing agreements or in accordance with the applicable tax
      statute.
(2)
This
      table only includes known obligations for uncertain tax positions. See
      Note 11. Adoption of FIN 48 and Income Taxes, in the Unaudited Condensed
      Consolidated Financial Statements, for a description of all uncertain tax
      positions, of which the ultimate amount and timing of settlement cannot be
      reasonably estimated.
(3)
Expenditures
      are estimated
For
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
June 30, 2008, there were NJR guarantees covering approximately $443 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 Unaudited Condensed Consolidated Balance Sheet.
As a
result of an increase in the estimated total project costs of Steckman Ridge,
from an original cost estimate of approximately $250 million to a revised
estimate of approximately $265 million, the Company is obligated to fund up to
$132.5 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 the facility once construction activities are
completed, therefore potentially reducing the aggregate recourse amount funded
by NJR. 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 $81.8 million, including
cash payments of $57.2 million during the nine months ended June 30,
2008.
Off-Balance-Sheet
Arrangements
The
Company does not have any off-balance-sheet financing arrangements.
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New
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Part
I
ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
Cash
Flow
Operating
Activities
As
presented in the Unaudited Condensed Consolidated Statements of Cash Flows, cash
flow generated from operating activities totaled $144.3 million for the nine
months ended June 30, 2008, compared with cash flow from operations of $160.6
million for the same period in fiscal 2007. Net income was lower for the nine
month period ending June 30, 2008 as compared with the same period in fiscal
2007, primarily driven by higher net unrealized losses as a result of changes in
volumes and prices of derivative financial instruments. In addition, decreases
in Operating cash flows are typically affected by variations in working capital,
which are a function of the seasonality of NJR's business, fluctuations in
wholesale natural gas prices, management of the deferral and recovery of gas
costs, and the timing of storage injections and withdrawals, as well as the
collections of receivables and payments of current liabilities. The components
of working capital that contributed to the decrease in operating cash flows for
the nine months ended June 30, 2008 as compared with the same period in fiscal
2007 are as follows:
Ÿ
at
      NJRES, an increase in natural gas inventory purchases for the nine months
      ended June 30, 2008 at higher average prices compared with the same period
      in the prior fiscal year to facilitate both increased storage inventory
      and greater sales volumes during fiscal 2008.
Ÿ
an
      increase in sales volumes at NJRES of approximately 4.6 Bcf in fiscal 2008
      compared to 3.2 Bcf in prior fiscal year that resulted in an increase in
      receivable balances as of June 30, 2008 as compared to September 30, 2007.
      NJRES receivable balances, which are normally fully collected within 30
      days and do not have any allowance for doubtful accounts, were impacted by
      a 53.7 percent increase in the average sales price for the month of June
      2008 as compared to June 2007, as a result of the increase in the
      wholesale price of natural gas;
Ÿ
an
      increase in broker margin balances as a result of the impact of adverse
      market price movements on NJRES' short (derivatives sold as an economic
      hedge of forecasted sales of the underlying commodity) futures
      positions.
These
decreases in cash were offset by:
Ÿ
at
      NJRES, an increase in gas purchases payable related to natural gas storage
      build and higher sales volumes during fiscal 2008; As of June 30, 2008,
      the average cost of gas inventory increased to approximately $13 per
      dekatherm from approximately $6 per dekatherm at the end of the prior
      fiscal period;
Ÿ
an
      increase in gas purchases payable at NJNG as a result of a slight increase
      in commodity purchase volumes coupled with an average price increase of
      40.6 percent;
Ÿ
a
      decrease in LNG and underground storage volumes at NJNG, which is a result
      of withdrawals through the winter heating season offset by lower volumes
      of gas added to inventory during the current injection season compared to
      the amount of gas injected during the same period in fiscal 2007. The
      decrease in volumes were slightly offset by a 2.1 percent increase in
      average inventory cost; and
Ÿ
at
      NJNG, lower BGSS customer refunds during fiscal 2008 compared to fiscal
      2007.
NJNG's
MGP expenditures are currently expected to total $22.7 million in fiscal 2008
(see
Note 12. Commitments and
Contingent Liabilities
in the Unaudited Condensed Consolidated Financial
Statements
).
Page
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Table of Contents
New
Jersey Resources Corporation
Part
I
ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
Investing
Activities
Cash
flows used in investing activities totaled $74.7 million for the nine months
ended June 30, 2008, compared with $94.2 million in the same period in fiscal
2007. The decrease was due primarily to a reduction in the investments in
Steckman Ridge offset by increases in utility plant expenditures during 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 June 30,
2008, CR&R owned 83 acres of undeveloped land and a 56,400-square-foot
building on 5 acres of land.
On June
5, 2008, the FERC issued Steckman Ridge, LP a certificate of public convenience
and necessity authorizing the ownership, construction and operation of a natural
gas storage facility and associated facilities (the Steckman Ridge Project) in
Bedford County, Pennsylvania.
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 once construction
of the facility is complete; however, there can be no assurances that this will
occur. NJR is obligated to fund up to its maximum of $132.5 million for the
construction and development of Steckman Ridge regardless of the ability of
Steckman Ridge, NJR or its partner to secure non-recourse financing. Through
June 30, 2008, NJR expended $71.6 million in acquisition and development costs.
NJR anticipates that construction on Steckman Ridge will be completed during the
first quarter of fiscal 2010.
NJRES
does not currently anticipate any significant capital expenditures in fiscal
2008.
Financing
Activities
Cash flow
used in financing activities totaled $48.8 million for the nine months ended
June 30, 2008, compared with $65.7 million for the same period in the prior
fiscal year. Financing cash flows are seasonal in nature. Cash requirements are
lower as inventory levels decline toward the end of the withdrawal season.
Inventory levels were lower at the end of the third quarter of fiscal 2008
compared to the same period last year resulting in a reduction in short term
borrowings during fiscal 2008. This decrease in cash used was offset by payments
for treasury stock of $11.0 million, of which $7.7 million is related to settled
purchases made during the fourth quarter of fiscal 2007.
NJNG
provides funding for certain of its infrastructure projects through tax exempt,
variable rate debt, which has been issued to back six series of auction rate
securities (ARS) through the Economic Development Authority of New Jersey (EDA),
and are based on the borrowing costs of the ARS. During periods of reduced
liquidity for ARS, NJNG's rate on its variable rate debt could default to a
maximum rate of the lesser of (i) 175 percent of the 30-day LIBOR or (ii) 10 to
12 percent, as applicable to a particular series of ARS. NJNG is currently
reviewing alternatives that include the refinancing of these bonds to eliminate
any increase in interest rate risk.
NJNG
received $7.5 million during the first quarter of fiscal 2008, in connection
with the sale-leaseback of its gas meters. This sale-leaseback program will
continue on an annual basis.
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New
Jersey Resources Corporation
Part
I
ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS (Continued)
Credit
Ratings
The table
below summarizes NJNG's current credit ratings issued by two rating entities,
Standard and Poor's (S&P) and Moody's Investors Service, Inc.
(Moody's):
Standard
      and Poor's
Moody's
Corporate Rating
A
N/A
Commercial
      Paper
A-1
P-1
Senior
      Secured
A+
Aa3
Ratings
      Outlook
Negative
Stable
On April
3, 2008, S&P adjusted NJNG's corporate credit rating from A+ to
A.
NJNG's
S&P and Moody's ratings are investment-grade ratings. S&P and Moody's
give NJNG's commercial paper the highest rating within the Commercial Paper
investment-grade category. 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 5.5 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 September 30, 2007
to June 30, 2008:
(Thousands)
Balance
September
      30,
2007
Increase
(Decrease)
in
      Fair
Market Value
Less
Amounts
Settled
Balance
June
      30,
2008
NJNG
$(51,861
)
$  41,448
$19,720
$(30,133
)
NJRES
89,446
(137,124
)
28,845
(76,523
)
NJR
      Energy
28,353
19,172
1,815
45,710
Total
$
      65,938
$
      (76,504
)
$50,380
$(60,946
)
There
were no changes in methods of valuations during the quarter ended June 30,
2008.
The
following is a summary of fair market value of financial derivatives related to
natural gas purchases and sales at June 30, 2008, 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
$17,752
$(42,633)
$(10,555
)
—
$(35,436
)
Price
      based on other external data
(8,115
)
(14,379)
(3,016
)
—
(25,510
)
Total
$  9,637
$(57,012)
$(13,571
)
—
$(60,946
)
The
following is a summary of financial derivatives by type as of June 30,
2008:
Volume
(Bcf)
Price
      per
Mmbtu
Amounts
      included
in
      Derivatives (Thousands)
NJNG
Futures
(0.9
)
$7.43
      - $13.05
$   1,827
Swaps
(1.8
)
$4.19
      - $16.59
$(31,960
)
NJRES
Futures
(3.0
)
$7.37
      - $14.07
$(13,602
)
Swaps
(71.4
)
$6.74
      - $18.01
$(61,708
)
Options
2.0
$7.50
      - $13.25
$  (1,213
)
NJR
      Energy
Swaps
6.0
$3.22
      - $ 4.39
$
      45,710
Total
$(60,946
)
The
following table reflects the changes in the fair market value of physical
commodity contracts from September 30, 2007 to  June 30,
2008:
(Thousands)
Balance
September
      30,
2007
Increase
(Decrease)
      in Fair
Market Value
Less
Amounts
Settled
Balance
June
      30,
2008
NJRES
—
$13,165
$12,952
$213
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.
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Part
I
ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      (Continued)
The VaR
at June 30, 2008, using the variance-covariance method with a 95 percent
confidence level and a 1-day holding period, was $600,000. The VaR with a 99
percent confidence level and a 10-day holding period was $2.5 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 June 30, 2008. 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 of June 30, 2008 is as follows:
(Thousands)
Gross
      Credit
Exposure
Net
      Credit
Exposure
Investment
      grade
$316,307
$248,149
Noninvestment
      grade
7,560
—
Internally
      rated investment grade
12,171
4,964
Internally
      rated noninvestment grade
3,214
—
Total
$339,252
$253,113
NJNG's
counterparty credit exposure as of June 30, 2008 is as follows:
(Thousands)
Gross
      Credit
Exposure
Net
      Credit
Exposure
Investment
      grade
$77,364
$63,943
Noninvestment
      grade
2,677
6
Internally
      rated investment grade
267
39
Internally
      rated noninvestment grade
—
—
Total
$80,308
$63,988
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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
As of
June 30, 2008, the Company (excluding NJNG) had no variable-rate long-term
debt.
As of
June 30, 2008, NJNG is obligated with respect to loan agreements securing six
series of auction rate bonds totaling approximately $97.0 million of
variable-rate debt backed by securities issued by the EDA. The EDA bonds are ARS
and have an interest rate reset every 7 or 35 days, depending upon the
applicable series, when an auction is held for the purposes of determining the
interest rate pricing of the securities. The interest rate associated with the
NJNG variable-rate debt is based on the rates the EDA receives from its ARS. As
of June 30, 2008, most of the auctions surrounding the EDA ARS have failed,
resulting in the securities bearing interest at their maximum rates, as defined
in the ARS, as the lesser of (i) 175 percent of 30-day LIBOR or (ii) 10 to 12
percent per annum, as applicable to such series of ARS. While the failure of the
ARS auctions has no default impact on NJNG's variable-rate debt, it does impact
its borrowing costs of the variable-rate debt. As such, NJNG currently has a
weighted average interest rate of 4.1 percent as of June 30, 2008. There can be
no assurance that the ARS securities of the EDA will have enough market
liquidity to return interest rates below their maximum rate.
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.
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Part
I
ITEM
      4. CONTROLS AND PROCEDURES (Continued)
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 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 Unaudited Condensed Consolidated
Statements of Income and of Cash flows for the nine months ended June 30, 2007.
As set forth in Public Company Accounting Oversight Board Auditing Standard No.
5, a material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company's annual or interim
financial statements will not be prevented or detected on a timely
basis.
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
continues to of actively address and remediate the material weakness in internal
control over financial reporting described above. 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.
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Part
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ITEM
      4. CONTROLS AND PROCEDURES (Continued)
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 June 30, 2008, that have materially affected, or are
reasonably likely to materially affect, internal control over financial
reporting.
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New
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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
in the Unaudited Condensed Consolidated
Financial Statements. No legal proceedings became reportable during the quarter
ended June 30, 2008 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
While NJR
attempts to identify, manage and mitigate risks and uncertainties associated
with its business to the extent practical, under the circumstances, some level
of risk and uncertainty will always be present. Part I, Item 1A, "Risk Factors,"
of NJR's 2007 Annual Report on Form 10-K and Part II, Item 1A, "Risk Factors" of
NJR's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (2nd
Quarter 10-Q) include a detailed discussion of NJR's risk factors. These risks
and uncertainties have the potential to materially affect NJR's financial
condition and results of operations. There have not been any material changes
from the risk factors as previously disclosed by NJR in the 2007 Annual Report
on Form 10-K and the 2nd Quarter 10-Q.
ITEM 2.
UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
      PROCEEDS
In 1996,
the NJR's Board of Directors ("Board") authorized the Company to implement a
share repurchase program, which has been expanded several times since the
inception of the program. On November 14, 2007, the Board authorized an increase
to the plan to permit the repurchase, in the open market or in privately
negotiated transactions, of 1.5 million shares, bringing the total permitted
repurchases to 6.8 million shares as of that date. As of June 30, 2008, the
Company has 1.4 million shares of its common stock still available for
repurchase.
The
following table sets forth NJR's repurchase activity for the quarter ended June
30, 2008:
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
04/01/08
      – 04/30/08
—
—
—
1,409,171
05/01/08
      – 05/31/08
—
—
—
1,409,171
06/01/08
      – 06/30/08
—
—
—
1,409,171
Total
—
—
—
1,409,171
*
Share data has been retroactively adjusted to reflect a 3 for 2 stock split
effective March 3, 2008.
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New
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Part
II
ITEM
      5. OTHER INFORMATION
Ba
se Rate Case and Signed Stipulation
As a
result of increases in NJNG's operation, 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.
On July
30, 2008, NJNG and the Department of the Public Advocate, Division of Rate
Counsel signed an agreement that stipulated the principal financial terms
of a settlement of its petitioned rate increase. Pending final review and
approval by the BPU, NJNG would receive a revenue increase to its base rates of
approximately $32.5 million, which is inclusive of an approximate $13 million
impact of a change to the conservation incentive program baseline usage level,
receive an allowed return on equity component of 10.3 percent, reduce its
depreciation expense component from 3.0 percent to 2.34 percent, and reduce its
depreciation expense by $1.6 million annually as a result of the amortization of
previously recovered asset retirement obligations, all of which are expected to
commence on or about October 1, 2008. A copy of the Company's press release
dated August 5, 2008 announcing this event is filed as Exhibit 99.1 to this
Quarterly Report on Form 10-Q and is incorporated by reference
herein.
ITEM
6. EXHIBITS
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*
99.1
Press
      Release dated August 5, 2008
*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.
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54
Table of Contents
New
Jersey Resources Corporation
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:
August 5,
    2008
By
:
/s/ Glenn C.
      Lockwood
Glenn
      C. Lockwood
Senior
      Vice President and
Chief
      Financial Officer
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55