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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021


☐			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	Exact name of registrant as specified in its charter	State of Incorporation	I.R.S. Employer Identification No.
1-6364	South Jersey Industries, Inc.	New Jersey	22-1901645
000-22211	South Jersey Gas Co	New Jersey	21-0398330

Address of principal executive offices

City

State

Zip Code

Registrant's telephone number, including area code

South Jersey Industries, Inc.

1 South Jersey Plaza

Folsom

New Jersey

08037

(609)

561-9000

South Jersey Gas Co

1 South Jersey Plaza

Folsom

New Jersey

08037

(609)

561-9000

Securities registered pursuant to Section 12(b) of the Act:

South Jersey Industries, Inc.


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock - $1.25 par value per share	SJI	New York Stock Exchange
5.625% Junior Subordinated Notes due 2079	SJIJ	New York Stock Exchange

Corporate Units	~~SJIU~~SJIV	New York Stock Exchange

South Jersey Gas Co


Title of each class	Trading Symbol(s)	Name of exchange on which registered
None	N/A	N/A

Indicate by check mark whether each 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 such registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that such registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

South Jersey Industries, Inc.:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

South Jersey Gas Co:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if either registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether either registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐

No ☒

South Jersey Industries, Inc. (SJI) common stock ($1.25 par value) outstanding as of ~~August~~May 1, ~~2020~~2021 was ~~100,586,050~~112,421,394 shares. South Jersey Gas Company common stock ($2.50 par value) outstanding as of ~~August~~May 1, ~~2020~~2021 was 2,339,139 shares. All of South Jersey Gas Company's outstanding shares of common stock are held by SJI Utilities, Inc., which is a wholly-owned subsidiary of SJI.

South Jersey Gas Company is ~~a direct~~an indirect wholly-owned subsidiary of SJI ~~Utilities, Inc.~~ and meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q. As such, South Jersey Gas Company files its Quarterly Report on Form 10-Q with the reduced disclosure format authorized by General Instruction H.

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	Page No.
Glossary of Terms and Abbreviations			4
Item 1.	Financial Statements (Unaudited)	78
	South Jersey Industries, Inc.
	Condensed Consolidated Statements of Income~~/(Loss)~~	78
	Condensed Consolidated Statements of Comprehensive Income~~/(Loss)~~	9
	Condensed Consolidated Statements of Cash Flows	10
	Condensed Consolidated Balance Sheets	11
	Condensed Consolidated Statements of Changes in Equity	13

	South Jersey Gas Company
	Condensed Statements of Income	14
	Condensed Statements of Comprehensive Income	1615
	Condensed Statements of Cash Flows	1716
	Condensed Balance Sheets	1817
	Condensed Statements of Changes in Equity	2019

	Notes to Unaudited Condensed Consolidated Financial Statements	2120
	South Jersey Industries, Inc. and South Jersey Gas Company - Combined
	Note 1. Summary of Significant Accounting Policies	2120
	Note 2. Stock-Based Compensation Plan	2725
	Note 3. Affiliations, Discontinued Operations and Related-Party Transactions	2927
	Note 4. Common Stock	3230
	Note 5. Financial Instruments	3332
	Note 6. Segments of Business	3534
	Note 7. Rates and Regulatory Actions	3938
	Note 8. Regulatory Assets & Regulatory Liabilities	4139
	Note 9. Pension and Other Postretirement Benefits	4442
	Note 10. Lines of Credit & Short-Term Borrowings	4643
	Note 11. Commitments and Contingencies	4744
	Note 12. Derivative Instruments	4845
	Note 13. Fair Value of Financial Assets and Financial Liabilities	5249
	Note 14. Long-Term Debt	5753
	Note ~~15. Accumulated Other Comprehensive Loss~~1 5 . Revenue	54
	Note 1 6 . Acquisitions & Business Combinations	57
	Note ~~16. Revenue~~1 7 . Goodwill and Identifiable Intangible Assets	59
	~~Note 17. Business Combinations~~	6257
	Note ~~18. Goodwill and Identifiable Intangible Assets~~	6318
	~~Note 19. Leases~~	64
	~~Note 20.~~. Subsequent Events	6659
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6760
	South Jersey Industries, Inc.	7263
	South Jersey Gas Company	8976
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9279
Item 4.	Controls and Procedures	9582
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	9683
Item 1A.	Risk Factors	9683
Item 6.	Exhibits	9784
Signatures

Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS



ACB			ACB Energy Partners, LLC
ACLE			AC Landfill Energy, LLC
~~Acquisition~~ADIT			~~The Company's acquisition of the assets of Elizabethtown Gas Company and Elkton Gas Company effective July 1, 2018, from Pivotal Utility Holdings, Inc., a subsidiary of Southern Company Gas~~Accumulated Deferred Income Taxes
AEP			Applied Energy Partners, LLC
AFUDC			Allowance for Funds During Construction
AIRP			Accelerated Infrastructure Replacement Program
AMA			Asset Management Agreement
Annadale			Annadale Community Clean Energy Projects LLC
AOCL			Accumulated Other Comprehensive Loss

ARO			Asset Retirement Obligation
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
ATM			At-The-Market

BCLE			BC Landfill Energy, LLC
BGSS			Basic Gas Supply Service

BPU			New Jersey Board of Public Utilities

CARES Act			Coronavirus Aid, Relief and Economic Security Act of 2020
Catamaran			Catamaran Renewables, LLC
CEGR			Compounded Earnings Annual Growth Rate
CEP			Clean Energy Program (ETG)
CHP			Combined Heat and Power
CIP			Conservation Incentive Program
CLEP			Clean Energy Program (SJG)
CODM			Chief Operating Decision Maker
COVID-19			Novel coronavirus





DRP			Dividend Reinvestment Plan
dt			Decatherm
dts/d			Decatherms per day
EDIT			Excess Deferred Income Taxes
EEP			Energy Efficiency Program
EET			Energy Efficiency Tracker
EGR			Earnings Growth Rate
ELK			Elkton Gas Company
EMI			Energy & Minerals, Inc.
EnerConnex			EnerConnex, LLC
Energenic			Energenic US, LLC
EnergyMark			EnergyMark, LLC
EPS			Earnings Per Share
ERIP			Early Retirement Incentive Program
ERISA			Employee Retirement Income Security Act of 1974
ETG			Elizabethtown Gas Company
ETG/ELK Acquisition			The Company's acquisition of the assets of Elizabethtown Gas Company and Elkton Gas Company effective July 1, 2018, from Pivotal Utility Holdings, Inc., a subsidiary of Southern Company Gas

FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission

GAAP			Generally Accepted Accounting Principles for financial reporting in the United States

Table of Contents


IAM			International Association of Machinists and Aerospace Workers
IBEW			International Brotherhood of Electrical Workers
IIP			Infrastructure Investment Programs
ITC

~~Table of Contents~~Investment Tax Credit


LIBOR			London Interbank Offer Rate
LMP			Locational Marginal Price

Marina			Marina Energy, LLC




Midstream			SJI Midstream, LLC
Millennium			Millennium Account Services, LLC
MPSC			Maryland Public Service Commission
MMdts			One million decatherms
MMmWh			One million megawatt hours
Morie			The Morie Company, Inc.
MTF			Marina Thermal Facility

MTN			Medium Term Notes

MW			Megawatt
MWh			Megawatt-hours



NCI			Noncontrolling Interest
NOL			Net Operating Loss
Non-GAAP			The financial measures that are not prepared in accordance with U.S. GAAP
NPA			Note Purchase Agreement


NJEDA			New Jersey Economic Development Authority

NYMEX			New York Mercantile Exchange

OSMC			On-System Margin Sharing Credit
OSS			Off-System Sales
PennEast			PennEast Pipeline, LLC
Potato Creek			Potato Creek, LLC
RAC			Remediation Adjustment Clause
REV			REV LNG, LLC
RNG			Renewable Natural Gas
ROE			Return on Equity
ROU
			Right of Use
SBC			Societal Benefits Clause

SCLE			SC Landfill Energy, LLC
SEC			Securities and Exchange Commission
SERP			Supplemental Executive Retirement Plan
SHARP			Storm Hardening and Reliability Program
SJE			South Jersey Energy Company
SJEI			SJI Energy Investments, LLC
SJES			South Jersey Energy Solutions, LLC
SJESP			South Jersey Energy Service Plus, LLC
SJEX			South Jersey Exploration, LLC
SJF			South Jersey Fuel, Inc.
SJG			South Jersey Gas Co or South Jersey Gas Company
SJI			South Jersey Industries, Inc., or the Company
SJIU			SJI Utilities, Inc.
SJRG			South Jersey Resources Group, LLC

Table of Contents


SRECs			Solar Renewable Energy Credits
SXLE			SX Landfill Energy, LLC
Tax Reform			Tax Cuts and Jobs Act which was enacted into law on December 22, 2017


TIC			Transportation Initiation Clause

TSA			Transition Services Agreement
TSR			Total Shareholder Return

Utilities			Represents SJI's three utility businesses: SJG, ETG, and until its sale, ELK
UWUA			United Workers Union of America
VSIP			Voluntary Separation Incentive Program

WNC			Weather Normalization Clause

Table of Contents

INTRODUCTION

FILING FORMAT

This Quarterly Report on Form 10-Q is a combined report being filed separately by two registrants: South Jersey Industries, Inc. (SJI) and South Jersey Gas Company (SJG). Information relating to SJI or any of its subsidiaries, other than SJG, is filed by SJI on its own behalf. SJG is only responsible for information about itself.

Except where the content clearly indicates otherwise, any reference in the report to "SJI," "the Company," "we," "us" or "our" is to the holding company or SJI and all of its subsidiaries, including SJG, which is a wholly-owned subsidiary of SJI Utilities, Inc. (which is wholly-owned by SJI).

Part 1 - Financial information in this Quarterly Report on Form 10-Q includes separate financial statements (i.e., balance sheets, statements of income, ~~(loss),~~ statements of comprehensive income, ~~(loss),~~ statements of equity and statements of cash flows) for each of SJI and SJG. The Notes to Unaudited Condensed Consolidated Financial Statements are presented on a combined basis for both SJI and SJG. Management's Discussion and Analysis of Financial Condition and Results of Operations (Management's Discussion) included under Item 2 is divided into two major sections: SJI and SJG.

Table of Contents

Item 1. Condensed Consolidated Financial Statements

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME/(LOSS)~~INCOME (UNAUDITED)

(In Thousands, Except for Per Share Data)


		Three Months Ended June 30,							Three Months Ended March 31,
		2020		2019			2021		2020
Operating Revenues:	Operating Revenues:					Operating Revenues:
Utility	Utility	$	145,846	$	106,832	Utility	$	402,616	$	386,881
Nonutility	Nonutility	114,118		160,102		Nonutility	271,684		147,231
Total Operating Revenues	Total Operating Revenues	259,964		266,934		Total Operating Revenues	674,300		534,112
Operating Expenses:	Operating Expenses:					Operating Expenses:
Cost of Sales - (Excluding depreciation and amortization)	Cost of Sales - (Excluding depreciation and amortization)					Cost of Sales - (Excluding depreciation and amortization)
- Utility	- Utility	45,564		16,721		- Utility	126,513		135,326
- Nonutility	- Nonutility	102,089		148,620		- Nonutility	245,061		130,742
Operations		52,656		56,608

Maintenance		9,397		9,273
Operations and Maintenance						Operations and Maintenance	70,103		71,951
Depreciation	Depreciation	27,431		24,129		Depreciation	31,812		26,469
Energy and Other Taxes	Energy and Other Taxes	2,636		2,717		Energy and Other Taxes	3,983		3,862

Total Operating Expenses	Total Operating Expenses	239,773		258,068		Total Operating Expenses	477,472		368,350
Operating Income	Operating Income	20,191		8,866		Operating Income	196,828		165,762

Other Income		3,625		29
Other Income and Expense						Other Income and Expense	2,068		(1,147)
Interest Charges	Interest Charges	(28,589)		(28,434)		Interest Charges	(31,459)		(32,536)
Loss Before Income Taxes		(4,773)		(19,539)
Income Before Income Taxes						Income Before Income Taxes	167,437		132,079
Income Taxes	Income Taxes	178		4,646		Income Taxes	(41,769)		(33,370)
Equity in Earnings of Affiliated Companies	Equity in Earnings of Affiliated Companies	2,017		1,589		Equity in Earnings of Affiliated Companies	3,130		2,391
Loss from Continuing Operations		(2,578)		(13,304)
Income from Continuing Operations						Income from Continuing Operations	128,798		101,100
Loss from Discontinued Operations - (Net of tax benefit)	Loss from Discontinued Operations - (Net of tax benefit)	(61)		(95)		Loss from Discontinued Operations - (Net of tax benefit)	(71)		(59)
Net Loss		$	(2,639)	$	(13,399)
Net Income						Net Income	128,727		101,041
Less: Income Attributable to Noncontrolling Interest						Less: Income Attributable to Noncontrolling Interest	129		0
�� Net Income Attributable to South Jersey Industries, Inc.						�� Net Income Attributable to South Jersey Industries, Inc.	$	128,598	$	101,041

Basic Loss Per Common Share:
Basic Earnings Per Common Share:						Basic Earnings Per Common Share:
Continuing Operations	Continuing Operations	$	(0.03)	$	(0.14)	Continuing Operations	$	1.28	$	1.09
Discontinued Operations	Discontinued Operations	—		—		Discontinued Operations	0		0
Basic Loss Per Common Share		$	(0.03)	$	(0.14)
Net Income						Net Income	1.28		1.09
Less: Income Attributable to Noncontrolling Interest						Less: Income Attributable to Noncontrolling Interest	—		—
Net Income Attributable to South Jersey Industries, Inc.						Net Income Attributable to South Jersey Industries, Inc.	$	1.28	$	1.09

Average Shares of Common Stock Outstanding - Basic	Average Shares of Common Stock Outstanding - Basic	93,712		92,389		Average Shares of Common Stock Outstanding - Basic	100,845		92,445

Diluted Loss Per Common Share:
Diluted Earnings Per Common Share:						Diluted Earnings Per Common Share:
Continuing Operations	Continuing Operations	$	(0.03)	$	(0.14)	Continuing Operations	$	1.26	$	1.09
Discontinued Operations	Discontinued Operations	—		—		Discontinued Operations	0		0
Diluted Loss Per Common Share		$	(0.03)	$	(0.14)
Net Income						Net Income	1.26		1.09
Less: Income Attributable to Noncontrolling Interest						Less: Income Attributable to Noncontrolling Interest	—		—
Net Income Attributable to South Jersey Industries, Inc.						Net Income Attributable to South Jersey Industries, Inc.	$	1.26	$	1.09

Average Shares of Common Stock Outstanding - Diluted	Average Shares of Common Stock Outstanding - Diluted	93,712		92,389		Average Shares of Common Stock Outstanding - Diluted	101,937		92,556

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

~~Table of Contents~~

Six Months Ended
June 30,
2020 2019
Operating Revenues:
Utility $ 532,727 $ 521,178
Nonutility 261,349 383,054
Total Operating Revenues 794,076 904,232
Operating Expenses:
Cost of Sales - (Excluding depreciation and amortization)
- Utility 180,890 205,170
- Nonutility 232,831 362,558
Operations 115,012 119,434
Maintenance 18,992 18,903
Depreciation 53,900 47,814
Energy and Other Taxes 6,498 6,934
Total Operating Expenses 608,123 760,813
Operating Income 185,953 143,419
Other Income 2,478 2,604
Interest Charges (61,125) (57,087)
Income Before Income Taxes 127,306 88,936
Income Taxes (33,192) (20,303)
Equity in Earnings of Affiliated Companies 4,408 3,762
Income from Continuing Operations 98,522 72,395
Loss from Discontinued Operations - (Net of tax benefit) (120) (157)
Net Income $ 98,402 $ 72,238
Basic Earnings Per Common Share:
Continuing Operations $ 1.06 $ 0.79
Discontinued Operations — —
Basic Earnings Per Common Share $ 1.06 $ 0.79
Average Shares of Common Stock Outstanding - Basic 93,078 91,863
Diluted Earnings Per Common Share:
Continuing Operations $ 1.06 $ 0.79
Discontinued Operations — —
Diluted Earnings Per Common Share $ 1.06 $ 0.79
Average Shares of Common Stock Outstanding - Diluted 93,195 91,979

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

Table of Contents

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME/(LOSS)~~INCOME (UNAUDITED)

(In Thousands)

Three Months Ended
June 30,
2020 2019
Net Loss $ (2,639) $ (13,399)
Other Comprehensive Income, Net of Tax:
Reclassification of Unrealized Gain on Derivatives - Other to Net Loss, net of tax of $(4) and $(4), respectively 8 8
Other Comprehensive Income - Net of Tax 8 8
Comprehensive Loss $ (2,631) $ (13,391)


	Three Months Ended March 31,
	2021		2020
Net Income	$	128,727	$	101,041

Other Comprehensive Income, Net of Tax:

Reclassification of Unrealized Gain on Derivatives - Other to Net Income, net of tax of $(4) and $(4), respectively	8		8

Other Comprehensive Income - Net of Tax	8		8

Comprehensive Income	128,735		101,049
Less: Comprehensive Income Attributable to Noncontrolling Interest	129		0
Comprehensive Income Attributable to South Jersey Industries, Inc.	$	128,606	$	101,049

Six Months Ended
June 30,
2020 2019
Net Income $ 98,402 $ 72,238
Other Comprehensive Income, Net of Tax:
Reclassification of Unrealized Gain on Derivatives - Other to Net Income, net of tax of $(8) and $(8), respectively 16 16
Other Comprehensive Income - Net of Tax 16 16
Comprehensive Income $ 98,418 $ 72,254

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

Table of Contents

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Thousands)


							Three Months Ended March 31,
							2021		2020

		Six Months Ended June 30,
		2020		2019
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	$	206,310	$	216,079	Net Cash Provided by Operating Activities	$	198,463	$	165,898

Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Capital Expenditures	Capital Expenditures	(234,635)		(256,587)		Capital Expenditures	(105,380)		(113,671)

Acquisition-related Working Capital Settlement		—		15,600
Cash Paid for Acquisition, Net of Cash Acquired		(2,806)		—
Proceeds from Sale of Property, Plant & Equipment		104,311		24,292
Investment in Long-Term Receivables		(11,506)		(6,585)
Proceeds from Long-Term Receivables		7,524		4,983

Proceeds from Business Dispositions and Sale of Property, Plant & Equipment						Proceeds from Business Dispositions and Sale of Property, Plant & Equipment	0		104,275
Investment in Contract Receivables						Investment in Contract Receivables	(6,166)		(7,402)
Proceeds from Contract Receivables						Proceeds from Contract Receivables	3,370		4,665

Investment in Affiliates	Investment in Affiliates	(727)		(3,088)		Investment in Affiliates	(196)		(502)
Advances to Affiliates		—		(858)

Net Repayment of Notes Receivable - Affiliates	Net Repayment of Notes Receivable - Affiliates	2,730		—		Net Repayment of Notes Receivable - Affiliates	311		2,580
Acquisition/Divestiture Working Capital Settlement						Acquisition/Divestiture Working Capital Settlement	(267)		0
Other						Other	(4,000)		0

Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(135,109)		(222,243)		Net Cash Used in Investing Activities	(112,328)		(10,055)

Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Net (Repayments of) Borrowings from Short-Term Credit Facilities		(395,900)		409,502
Net Repayments of Short-Term Credit Facilities						Net Repayments of Short-Term Credit Facilities	(425,100)		(151,400)
Proceeds from Issuance of Long-Term Debt	Proceeds from Issuance of Long-Term Debt	600,000		10,000		Proceeds from Issuance of Long-Term Debt	300,000		0
Principal Repayments of Long-Term Debt	Principal Repayments of Long-Term Debt	(450,000)		(575,000)		Principal Repayments of Long-Term Debt	(2,500)		0
Payments for Issuance of Long-Term Debt	Payments for Issuance of Long-Term Debt	(5,874)		(1,275)		Payments for Issuance of Long-Term Debt	(9,108)		(791)
Dividends on Common Stock		(27,276)		(26,562)

Proceeds from Sale of Common Stock	Proceeds from Sale of Common Stock	200,000		189,032		Proceeds from Sale of Common Stock	42,272		0
Payments for the Issuance of Common Stock	Payments for the Issuance of Common Stock	(1,863)		—		Payments for the Issuance of Common Stock	(1,662)		0

Net Cash (Used in) Provided by Financing Activities		(80,913)		5,697
Net Cash Used in Financing Activities						Net Cash Used in Financing Activities	(96,098)		(152,191)

Net Decrease in Cash, Cash Equivalents and Restricted Cash		(9,712)		(467)
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash						Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash	(9,963)		3,652
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	Cash, Cash Equivalents and Restricted Cash at Beginning of Period	28,381		31,679		Cash, Cash Equivalents and Restricted Cash at Beginning of Period	41,831		28,381

Cash, Cash Equivalents and Restricted Cash at End of Period	Cash, Cash Equivalents and Restricted Cash at End of Period	$	18,669	$	31,212	Cash, Cash Equivalents and Restricted Cash at End of Period	$	31,868	$	32,033

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

Table of Contents

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Thousands)


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets	Assets					Assets
Property, Plant and Equipment:	Property, Plant and Equipment:					Property, Plant and Equipment:
Utility Plant, at original cost	Utility Plant, at original cost	$	5,040,204	$	4,905,350	Utility Plant, at original cost	$	5,350,943	$	5,265,661
Accumulated Depreciation	Accumulated Depreciation	(881,797)		(843,998)		Accumulated Depreciation	(940,177)		(914,122)
Nonutility Property and Equipment, at cost	Nonutility Property and Equipment, at cost	29,086		25,991		Nonutility Property and Equipment, at cost	149,606		147,764
Accumulated Depreciation	Accumulated Depreciation	(13,709)		(13,807)		Accumulated Depreciation	(35,374)		(35,069)

Property, Plant and Equipment - Net	Property, Plant and Equipment - Net	4,173,784		4,073,536		Property, Plant and Equipment - Net	4,524,998		4,464,234

Investments:	Investments:					Investments:
Available-for-Sale Securities	Available-for-Sale Securities	40		40		Available-for-Sale Securities	32		32
Restricted	Restricted	11,402		21,964		Restricted	1,482		7,786
Investment in Affiliates	Investment in Affiliates	91,323		87,087		Investment in Affiliates	112,936		106,230

Total Investments	Total Investments	102,765		109,091		Total Investments	114,450		114,048

Current Assets:	Current Assets:					Current Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	7,267		6,417		Cash and Cash Equivalents	30,386		34,045
Accounts Receivable	Accounts Receivable	231,434		253,661		Accounts Receivable	327,832		278,723
Unbilled Revenues	Unbilled Revenues	16,148		84,821		Unbilled Revenues	68,155		85,423
Provision for Uncollectibles	Provision for Uncollectibles	(30,410)		(19,829)		Provision for Uncollectibles	(35,855)		(30,582)
Notes Receivable - Affiliate	Notes Receivable - Affiliate	2,649		5,379		Notes Receivable - Affiliate	2,536		2,847
Natural Gas in Storage, average cost	Natural Gas in Storage, average cost	40,483		54,153		Natural Gas in Storage, average cost	18,800		39,440
Materials and Supplies, average cost	Materials and Supplies, average cost	1,139		1,164		Materials and Supplies, average cost	1,749		2,561
Prepaid Taxes	Prepaid Taxes	40,709		26,918		Prepaid Taxes	13,623		23,851
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	31,925		52,892		Derivatives - Energy Related Assets	38,541		41,439
Assets Held for Sale		40,044		143,440

Other Prepayments and Current Assets	Other Prepayments and Current Assets	41,382		43,492		Other Prepayments and Current Assets	23,148		29,081

Total Current Assets	Total Current Assets	422,770		652,508		Total Current Assets	488,915		506,828

Regulatory and Other Noncurrent Assets:	Regulatory and Other Noncurrent Assets:					Regulatory and Other Noncurrent Assets:
Regulatory Assets	Regulatory Assets	648,769		665,932		Regulatory Assets	650,710		673,992
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	11,486		7,243		Derivatives - Energy Related Assets	16,084		6,935
Notes Receivable - Affiliate	Notes Receivable - Affiliate	12,720		12,720		Notes Receivable - Affiliate	30,835		31,073
Contract Receivables	Contract Receivables	34,647		30,958		Contract Receivables	43,934		41,428
Goodwill	Goodwill	702,070		702,070		Goodwill	706,960		706,960
Other	Other	107,943		111,282		Other	137,622		143,650

Total Regulatory and Other Noncurrent Assets	Total Regulatory and Other Noncurrent Assets	1,517,635		1,530,205		Total Regulatory and Other Noncurrent Assets	1,586,145		1,604,038

Total Assets	Total Assets	$	6,216,954	$	6,365,340	Total Assets	$	6,714,508	$	6,689,148

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

Table of Contents

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Thousands)


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Capitalization and Liabilities	Capitalization and Liabilities					Capitalization and Liabilities
Equity:	Equity:					Equity:
Common Stock	Common Stock	$	125,733	$	115,493	Common Stock	$	128,215	$	125,740
Premium on Common Stock	Premium on Common Stock	1,216,363		1,027,902		Premium on Common Stock	1,193,552		1,218,000
Treasury Stock (at par)	Treasury Stock (at par)	(311)		(289)		Treasury Stock (at par)	(264)		(321)
Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss	(32,542)		(32,558)		Accumulated Other Comprehensive Loss	(38,208)		(38,216)
Retained Earnings	Retained Earnings	357,086		313,237		Retained Earnings	453,823		355,678

Total South Jersey Industries, Inc. Equity						Total South Jersey Industries, Inc. Equity	1,737,118		1,660,881
Noncontrolling Interest						Noncontrolling Interest	6,124		5,995
Total Equity	Total Equity	1,666,329		1,423,785		Total Equity	1,743,242		1,666,876

Long-Term Debt	Long-Term Debt	2,566,378		2,070,086		Long-Term Debt	3,063,394		2,776,400

Total Capitalization	Total Capitalization	4,232,707		3,493,871		Total Capitalization	4,806,636		4,443,276

Current Liabilities:	Current Liabilities:					Current Liabilities:
Notes Payable	Notes Payable	452,800		848,700		Notes Payable	171,300		596,400
Current Portion of Long-Term Debt	Current Portion of Long-Term Debt	117,909		467,909		Current Portion of Long-Term Debt	142,801		142,801
Accounts Payable	Accounts Payable	160,392		232,242		Accounts Payable	218,078		256,589
Customer Deposits and Credit Balances	Customer Deposits and Credit Balances	29,049		35,004		Customer Deposits and Credit Balances	29,039		35,899
Environmental Remediation Costs	Environmental Remediation Costs	54,731		43,849		Environmental Remediation Costs	47,803		45,265
Taxes Accrued	Taxes Accrued	3,028		2,235		Taxes Accrued	14,560		6,025
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	25,963		41,965		Derivatives - Energy Related Liabilities	21,837		27,006
Deferred Contract Revenues	Deferred Contract Revenues	347		—		Deferred Contract Revenues	514		479
Derivatives - Other Current	Derivatives - Other Current	2,101		1,155		Derivatives - Other Current	502		659
Liabilities Held for Sale		5,862		6,043

Dividends Payable	Dividends Payable	27,277		—		Dividends Payable	30,453		0
Interest Accrued	Interest Accrued	16,455		13,580		Interest Accrued	31,664		21,140
Pension Benefits	Pension Benefits	3,727		3,727		Pension Benefits	3,704		3,704
Other Current Liabilities	Other Current Liabilities	26,563		35,486		Other Current Liabilities	40,444		27,665

Total Current Liabilities	Total Current Liabilities	926,204		1,731,895		Total Current Liabilities	752,699		1,163,632

Deferred Credits and Other Noncurrent Liabilities:	Deferred Credits and Other Noncurrent Liabilities:					Deferred Credits and Other Noncurrent Liabilities:
Deferred Income Taxes - Net	Deferred Income Taxes - Net	134,611		92,166		Deferred Income Taxes - Net	188,800		149,534
Pension and Other Postretirement Benefits	Pension and Other Postretirement Benefits	114,422		114,055		Pension and Other Postretirement Benefits	132,199		135,023
Environmental Remediation Costs	Environmental Remediation Costs	145,339		189,036		Environmental Remediation Costs	139,954		148,310
Asset Retirement Obligations	Asset Retirement Obligations	194,307		263,950		Asset Retirement Obligations	203,539		202,092
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	5,305		8,206		Derivatives - Energy Related Liabilities	11,818		4,947
Derivatives - Other Noncurrent	Derivatives - Other Noncurrent	18,491		11,505		Derivatives - Other Noncurrent	6,939		9,279
Regulatory Liabilities	Regulatory Liabilities	434,148		442,918		Regulatory Liabilities	418,089		420,577
Other	Other	11,420		17,738		Other	53,835		12,478

Total Deferred Credits and Other Noncurrent Liabilities	Total Deferred Credits and Other Noncurrent Liabilities	1,058,043		1,139,574		Total Deferred Credits and Other Noncurrent Liabilities	1,155,173		1,082,240

Commitments and Contingencies (Note 11)	Commitments and Contingencies (Note 11)					Commitments and Contingencies (Note 11)	0		0

Total Capitalization and Liabilities	Total Capitalization and Liabilities	$	6,216,954	$	6,365,340	Total Capitalization and Liabilities	$	6,714,508	$	6,689,148

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

Table of Contents

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(In Thousands, Except for Per Share Data)

Common Stock Premium on Common Stock Treasury Stock AOCL Retained Earnings Total

Balance at January 1, 2020 $ 115,493 $ 1,027,902 $ (289) $ (32,558) $ 313,237 $ 1,423,785
Net Income — — — — 101,041 101,041
Other Comprehensive Income, Net of Tax — — — 8 — 8
Common Stock Issued or Granted Through Stock Plans 62 (352) 15 — — (275)
Cash Dividends Declared - Common Stock ($0.30 per share) — — — — (27,276) (27,276)
Balance at March 31, 2020 115,555 1,027,550 (274) (32,550) 387,002 1,497,283
Net Loss — — — — (2,639) (2,639)
Other Comprehensive Income, Net of Tax — — — 8 — 8
Common Stock Issued or Granted Through Equity Offering or Stock Plans 10,178 188,813 (37) — — 198,954
Cash Dividends Declared - Common Stock ($0.30 per share) — — — — (27,277) (27,277)
Balance at June 30, 2020 $ 125,733 $ 1,216,363 $ (311) $ (32,542) $ 357,086 $ 1,666,329


	Common Stock		Premium on Common Stock		Treasury Stock		AOCL		Retained Earnings		Total South Jersey Industries, Inc. Equity		NCI		Total Equity

Balance at January 1, 2021	$	125,740	$	1,218,000	$	(321)	$	(38,216)	$	355,678	$	1,660,881	$	5,995	$	1,666,876
Net Income	—		—		—		—		128,598		128,598		129		128,727
Other Comprehensive Income, Net of Tax	—		—		—		8		—		8		—		8
Common Stock Issued or Granted Through Equity Offering or Stock Plans	2,475		37,771		57		—		—		40,303		—		40,303
Contract Liability Adjustment (see Note 4)	—		(62,219)		—		—		—		(62,219)		—		(62,219)
Cash Dividends Declared - Common Stock ($0.303 per share)	—		—		—		—		(30,453)		(30,453)		—		(30,453)
Balance at March 31, 2021	$	128,215	$	1,193,552	$	(264)	$	(38,208)	$	453,823	$	1,737,118	$	6,124	$	1,743,242

Common Stock Premium on Common Stock Treasury Stock AOCL Retained Earnings Total

Balance at January 1, 2019 $ 106,883 $ 843,268 $ (292) $ (26,095) $ 343,258 $ 1,267,022
Net Income — — — — 85,637 85,637
Other Comprehensive Income, Net of Tax — — — 8 — 8
Common Stock Issued or Granted Through Equity Offering or Stock Plans 8,603 179,829 17 — — 188,449
Cash Dividends Declared - Common Stock ($0.29 per share) — — — — (26,562) (26,562)
Balance at March 31, 2019 115,486 1,023,097 (275) (26,087) 402,333 1,514,554
Net Loss — — — — (13,399) (13,399)
Other Comprehensive Income, Net of Tax — — — 8 — 8
Common Stock Issued or Granted Through Stock Plans 2 1,877 (8) — — 1,871
Cash Dividends Declared - Common Stock ($0.29 per share) — — — — (26,562) (26,562)
Balance at June 30, 2019 $ 115,488 $ 1,024,974 $ (283) $ (26,079) $ 362,372 $ 1,476,472





	Common Stock		Premium on Common Stock		Treasury Stock		AOCL		Retained Earnings		Total Equity

Balance at January 1, 2020	$	115,493	$	1,027,902	$	(289)	$	(32,558)	$	313,237	$	1,423,785
Net Income	—		—		—		—		101,041		101,041
Other Comprehensive Income, Net of Tax	—		—		—		8		—		8
Common Stock Issued or Granted Through Equity Offering or Stock Plans	62		(352)		15		—		—		(275)
Cash Dividends Declared - Common Stock ($0.295 per share)	—		—		—		—		(27,276)		(27,276)
Balance at March 31, 2020	$	115,555	$	1,027,550	$	(274)	$	(32,550)	$	387,002	$	1,497,283

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

Table of Contents

SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(In Thousands)


		Three Months Ended June 30,							Three Months Ended March 31,
											Three Months Ended March 31,
		2020		2019			2021		2020
Operating Revenues	Operating Revenues	$	87,182	$	62,268	Operating Revenues	$	251,399	$	240,694

Operating Expenses:	Operating Expenses:					Operating Expenses:
Cost of Sales (Excluding depreciation and amortization)	Cost of Sales (Excluding depreciation and amortization)	25,546		2,654		Cost of Sales (Excluding depreciation and amortization)	74,537		80,534
Operations		25,354		25,194
Maintenance		8,487		7,006
Operations and Maintenance						Operations and Maintenance	37,268		37,194
Depreciation	Depreciation	16,993		16,045		Depreciation	19,208		16,706
Energy and Other Taxes	Energy and Other Taxes	1,070		1,154		Energy and Other Taxes	1,544		1,615

Total Operating Expenses	Total Operating Expenses	77,450		52,053		Total Operating Expenses	132,557		136,049

Operating Income	Operating Income	9,732		10,215		Operating Income	118,842		104,645

Other Income		3,184		328
Other Income and Expense						Other Income and Expense	1,615		(1,350)

Interest Charges	Interest Charges	(8,019)		(7,896)		Interest Charges	(9,725)		(7,542)

Income Before Income Taxes	Income Before Income Taxes	4,897		2,647		Income Before Income Taxes	110,732		95,753

Income Taxes	Income Taxes	(1,219)		(671)		Income Taxes	(27,114)		(25,231)

Net Income	Net Income	$	3,678	$	1,976	Net Income	$	83,618	$	70,522

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

~~Table of Contents~~

Six Months Ended
June 30,
2020 2019
Operating Revenues $ 327,876 $ 334,466
Operating Expenses:
Cost of Sales (Excluding depreciation and amortization) 106,080 121,534
Operations 53,977 54,291
Maintenance 17,058 15,149
Depreciation 33,699 31,789
Energy and Other Taxes 2,685 3,143
Total Operating Expenses 213,499 225,906
Operating Income 114,377 108,560
Other Income 1,834 2,259
Interest Charges (15,561) (15,744)
Income Before Income Taxes 100,650 95,075
Income Taxes (26,450) (24,368)
Net Income $ 74,200 $ 70,707

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

1514

Table of Contents

SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In Thousands)


		Three Months Ended June 30,							Three Months Ended March 31,
											Three Months Ended March 31,
		2020		2019			2021		2020
Net Income	Net Income	$	3,678	$	1,976	Net Income	$	83,618	$	70,522

Other Comprehensive Income - Net of Tax:	Other Comprehensive Income - Net of Tax:					Other Comprehensive Income - Net of Tax:

Reclassification of Unrealized Gain on Derivatives - Other to Net Income, net of tax of $(4) and $(4), respectively		8		8
Reclassification of Unrealized Gain on Derivatives - Other to Net Loss, net of tax of $(4) and $(4), respectively						Reclassification of Unrealized Gain on Derivatives - Other to Net Loss, net of tax of $(4) and $(4), respectively	8		8

Other Comprehensive Income - Net of Tax *		8		8
Other Comprehensive Income - Net of Tax						Other Comprehensive Income - Net of Tax	8		8

Comprehensive Income	Comprehensive Income	$	3,686	$	1,984	Comprehensive Income	$	83,626	$	70,530

Six Months Ended
June 30,
2020 2019
Net Income $ 74,200 $ 70,707
Other Comprehensive Income - Net of Tax: *
Reclassification of Unrealized Gain on Derivatives - Other to Net Income, net of tax of $(8) and $(8), respectively 16 16
Other Comprehensive Income - Net of Tax * 16 16
Comprehensive Income $ 74,216 $ 70,723

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

1615

Table of Contents

SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Thousands)


							Three Months Ended March 31,

							2021			2020

		Six Months Ended June 30,

						2020			2019
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	$	125,459	$	126,275	Net Cash Provided by Operating Activities	125,284			86,431

Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Capital Expenditures	Capital Expenditures	(118,335)		(124,122)		Capital Expenditures	(61,437)			(53,399)
Investment in Long-Term Receivables		(11,506)		(6,585)
Proceeds from Long-Term Receivables		7,524		4,983
Investment in Contract Receivables						Investment in Contract Receivables	(6,166)			(7,402)
Proceeds from Contract Receivables						Proceeds from Contract Receivables	3,370			4,665

Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(122,317)		(125,724)		Net Cash Used in Investing Activities	(64,233)			(56,136)

Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Net Repayments of Short-Term Credit Facilities	Net Repayments of Short-Term Credit Facilities	(10,800)		(4,398)		Net Repayments of Short-Term Credit Facilities	(47,500)			(28,800)
Proceeds from Issuance of Long-Term Debt		400,000		10,000

Principal Repayments of Long-Term Debt	Principal Repayments of Long-Term Debt	(400,000)		—		Principal Repayments of Long-Term Debt	(2,500)			0
Payments from Issuance of Long-Term Debt		(3,001)		—
Additional Investment by Shareholder		9,500		—
Payments for Issuance of Long-Term Debt						Payments for Issuance of Long-Term Debt	(9)			(600)

Net Cash (Used in) Provided by Financing Activities		(4,301)		5,602

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash		(1,159)		6,153
Net Cash Used in Financing Activities						Net Cash Used in Financing Activities	(50,009)			(29,400)

Net Increase in Cash, Cash Equivalents and Restricted Cash						Net Increase in Cash, Cash Equivalents and Restricted Cash	11,042			895
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	Cash, Cash Equivalents and Restricted Cash at Beginning of Period	6,751		3,262		Cash, Cash Equivalents and Restricted Cash at Beginning of Period	6,424			6,751

Cash, Cash Equivalents and Restricted Cash at End of Period	Cash, Cash Equivalents and Restricted Cash at End of Period	$	5,592	$	9,415	Cash, Cash Equivalents and Restricted Cash at End of Period	$	17,466		$	7,646

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

1716

Table of Contents

SOUTH JERSEY GAS COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

(In Thousands)


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets	Assets					Assets
Property, Plant and Equipment:	Property, Plant and Equipment:					Property, Plant and Equipment:
Utility Plant, at original cost	Utility Plant, at original cost	$	3,239,031	$	3,154,736	Utility Plant, at original cost	$	3,436,938	$	3,387,831
Accumulated Depreciation	Accumulated Depreciation	(587,441)		(558,634)		Accumulated Depreciation	(621,825)		(606,925)

Property, Plant and Equipment - Net	Property, Plant and Equipment - Net	2,651,590		2,596,102		Property, Plant and Equipment - Net	2,815,113		2,780,906

Investments:	Investments:					Investments:
Restricted Investments	Restricted Investments	3,448		4,073		Restricted Investments	1,482		4,826

Total Investments	Total Investments	3,448		4,073		Total Investments	1,482		4,826

Current Assets:	Current Assets:					Current Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	2,144		2,678		Cash and Cash Equivalents	15,984		1,598
Accounts Receivable	Accounts Receivable	91,842		84,940		Accounts Receivable	130,286		88,657
Accounts Receivable - Related Parties	Accounts Receivable - Related Parties	499		2,333		Accounts Receivable - Related Parties	2,904		3,989
Unbilled Revenues	Unbilled Revenues	3,915		45,016		Unbilled Revenues	35,362		46,837
Provision for Uncollectibles	Provision for Uncollectibles	(14,472)		(14,032)		Provision for Uncollectibles	(20,473)		(17,359)
Natural Gas in Storage, average cost	Natural Gas in Storage, average cost	9,884		14,839		Natural Gas in Storage, average cost	4,643		14,050
Materials and Supplies, average cost	Materials and Supplies, average cost	619		619		Materials and Supplies, average cost	619		619
Prepaid Taxes	Prepaid Taxes	28,253		19,547		Prepaid Taxes	11,514		19,522
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	4,699		16,904		Derivatives - Energy Related Assets	4,382		4,053
Other Prepayments and Current Assets	Other Prepayments and Current Assets	22,822		25,074		Other Prepayments and Current Assets	8,870		12,710

Total Current Assets	Total Current Assets	150,205		197,918		Total Current Assets	194,091		174,676

Regulatory and Other Noncurrent Assets:	Regulatory and Other Noncurrent Assets:					Regulatory and Other Noncurrent Assets:
Regulatory Assets	Regulatory Assets	485,354		496,177		Regulatory Assets	473,402		495,084
Long-Term Receivables		34,647		30,958
Contract Receivables						Contract Receivables	43,934		41,428
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	143		5		Derivatives - Energy Related Assets	0		87
Other	Other	22,513		23,322		Other	26,117		25,258

Total Regulatory and Other Noncurrent Assets	Total Regulatory and Other Noncurrent Assets	542,657		550,462		Total Regulatory and Other Noncurrent Assets	543,453		561,857

Total Assets	Total Assets	$	3,347,900	$	3,348,555	Total Assets	$	3,554,139	$	3,522,265

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

1817

Table of Contents

SOUTH JERSEY GAS COMPANY

CONDENSED BALANCE SHEETS (UNAUDITED)

(In Thousands)


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Capitalization and Liabilities	Capitalization and Liabilities					Capitalization and Liabilities
Equity:	Equity:					Equity:
Common Stock	Common Stock	$	5,848	$	5,848	Common Stock	$	5,848	$	5,848
Other Paid-In Capital and Premium on Common Stock	Other Paid-In Capital and Premium on Common Stock	365,244		355,744		Other Paid-In Capital and Premium on Common Stock	465,244		465,244
Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss	(27,859)		(27,875)		Accumulated Other Comprehensive Loss	(31,598)		(31,606)
Retained Earnings	Retained Earnings	830,381		756,181		Retained Earnings	947,858		864,240

Total Equity	Total Equity	1,173,614		1,089,898		Total Equity	1,387,352		1,303,726

Long-Term Debt	Long-Term Debt	934,505		547,161		Long-Term Debt	1,013,940		1,016,280

Total Capitalization	Total Capitalization	2,108,119		1,637,059		Total Capitalization	2,401,292		2,320,006

Current Liabilities:	Current Liabilities:					Current Liabilities:
Notes Payable	Notes Payable	160,500		171,300		Notes Payable	0		47,500
Current Portion of Long-Term Debt	Current Portion of Long-Term Debt	27,909		417,909		Current Portion of Long-Term Debt	52,809		52,809
Accounts Payable - Commodity	Accounts Payable - Commodity	10,070		17,361		Accounts Payable - Commodity	17,541		22,199
Accounts Payable - Other	Accounts Payable - Other	36,645		60,797		Accounts Payable - Other	37,070		44,186
Accounts Payable - Related Parties	Accounts Payable - Related Parties	7,485		9,752		Accounts Payable - Related Parties	7,098		11,049
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	2,651		14,671		Derivatives - Energy Related Liabilities	352		2,868
Derivatives - Other Current	Derivatives - Other Current	732		488		Derivatives - Other Current	502		659
Customer Deposits and Credit Balances	Customer Deposits and Credit Balances	19,133		22,430		Customer Deposits and Credit Balances	16,950		23,637
Environmental Remediation Costs	Environmental Remediation Costs	34,995		29,569		Environmental Remediation Costs	24,280		23,067
Taxes Accrued	Taxes Accrued	1,973		1,907		Taxes Accrued	8,543		3,942
Pension Benefits	Pension Benefits	3,693		3,693		Pension Benefits	3,669		3,669
Interest Accrued	Interest Accrued	9,879		6,789		Interest Accrued	13,653		10,961
Other Current Liabilities	Other Current Liabilities	7,691		12,489		Other Current Liabilities	7,127		7,798

Total Current Liabilities	Total Current Liabilities	323,356		769,155		Total Current Liabilities	189,594		254,344

Regulatory and Other Noncurrent Liabilities:	Regulatory and Other Noncurrent Liabilities:					Regulatory and Other Noncurrent Liabilities:
Regulatory Liabilities	Regulatory Liabilities	255,229		274,482		Regulatory Liabilities	237,738		245,360
Deferred Income Taxes - Net	Deferred Income Taxes - Net	390,842		357,637		Deferred Income Taxes - Net	431,761		403,609
Environmental Remediation Costs	Environmental Remediation Costs	73,983		101,693		Environmental Remediation Costs	74,299		78,176
Asset Retirement Obligations	Asset Retirement Obligations	79,819		96,509		Asset Retirement Obligations	90,183		89,252
Pension and Other Postretirement Benefits	Pension and Other Postretirement Benefits	101,282		99,981		Pension and Other Postretirement Benefits	117,264		116,973
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	—		95		Derivatives - Energy Related Liabilities	275		190
Derivatives - Other Noncurrent	Derivatives - Other Noncurrent	10,675		7,368		Derivatives - Other Noncurrent	6,939		9,279
Other	Other	4,595		4,576		Other	4,794		5,076

Total Regulatory and Other Noncurrent Liabilities	Total Regulatory and Other Noncurrent Liabilities	916,425		942,341		Total Regulatory and Other Noncurrent Liabilities	963,253		947,915

Commitments and Contingencies (Note 11)	Commitments and Contingencies (Note 11)					Commitments and Contingencies (Note 11)	0		0

Total Capitalization and Liabilities	Total Capitalization and Liabilities	$	3,347,900	$	3,348,555	Total Capitalization and Liabilities	$	3,554,139	$	3,522,265

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

1918

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SOUTH JERSEY GAS COMPANY

CONDENSED STATEMENTS OF CHANGES IN COMMON EQUITY (UNAUDITED)

(In Thousands)


		Common Stock		Other Paid-In Capital and Premium on Common Stock		AOCL		Retained Earnings		Total			Common Stock		Other Paid-In Capital and Premium on Common Stock		AOCL		Retained Earnings		Total
Balance at January 1, 2020		$	5,848	$	355,744	$	(27,875)	$	756,181	$	1,089,898
Balance at January 1, 2021												Balance at January 1, 2021	$	5,848	$	465,244	$	(31,606)	$	864,240	$	1,303,726
Net Income	Net Income	—		—		—		70,522		70,522		Net Income	—		—		—		83,618		83,618
Other Comprehensive Income, Net of Tax	Other Comprehensive Income, Net of Tax	—		—		8		—		8		Other Comprehensive Income, Net of Tax	—		—		8		—		8
Balance at March 31, 2020		5,848		355,744		(27,867)		826,703		1,160,428
Net Income		—		—		—		3,678		3,678
Other Comprehensive Income, Net of Tax		—		—		8		—		8
Additional Investment by Shareholder		—		9,500		—		—		9,500
Balance at June 30, 2020		$	5,848	$	365,244	$	(27,859)	$	830,381	$	1,173,614
Balance at March 31, 2021												Balance at March 31, 2021	5,848		465,244		(31,598)		947,858		1,387,352


Balance at January 1, 2019		$	5,848	$	355,744	$	(22,357)	$	668,787	$	1,008,022
Balance at January 1, 2020												Balance at January 1, 2020	$	5,848	$	355,744	$	(27,875)	$	756,181	$	1,089,898
Net Income	Net Income	—		—		—		68,731		68,731		Net Income	—		—		—		70,522		70,522
Other Comprehensive Income, Net of Tax	Other Comprehensive Income, Net of Tax	—		—		8		—		8		Other Comprehensive Income, Net of Tax	—		—		8		—		8
Balance at March 31, 2019		5,848		355,744		(22,349)		737,518		1,076,761
Net Income		—		—		—		1,976		1,976
Other Comprehensive Income, Net of Tax		—		—		8		—		8
Balance at June 30, 2019		$	5,848	$	355,744	$	(22,341)	$	739,494	$	1,078,745
Balance at March 31, 2020												Balance at March 31, 2020	$	5,848	$	355,744	$	(27,867)	$	826,703	$	1,160,428

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

2019

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Notes to Condensed Consolidated Financial Statements

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

GENERAL - SJI provides a variety of energy-related products and services primarily through the following wholly-owned subsidiaries:

▪SJIU is a holding company that owns SJG and ETG and, until its sale, owned ELK.

•SJG is a regulated natural gas utility which distributes natural gas in the 7 southernmost counties of New Jersey.

•ETG is a regulated natural gas utility which distributes natural gas in 7 counties in northern and central New Jersey.

•ELK is a regulated natural gas utility which distributes natural gas in northern Maryland. On July 31, 2020, SJI sold ELK to a third-party buyer (see ~~"Agreement to Sell~~"Sale of ELK" below).

▪SJE acquires and markets electricity to retail end users.

▪SJRG markets natural gas storage, commodity and transportation assets along with fuel management services on a wholesale basis in the mid-Atlantic, Appalachian and southern states.

▪SJEX owns oil, gas and mineral rights in the Marcellus Shale region of Pennsylvania.

▪Marina, which makes up SJI's Renewables operating segment, develops and operates on-site energy-related projects. ~~Included~~Marina includes the Catamaran joint venture that was entered into in August 2020, which owns Annadale, an operator of fuel cell projects in New York. Marina ~~were~~owns 93% of Annadale, and we record the remaining ownership percentage as noncontrolling interest in the condensed consolidated financial statements. Previously, Marina also included MTF and ACB, which ~~in February 2020,~~ were sold to a third-party buyer in February 2020 (see ~~"Agreement to Sell~~"Sale of MTF & ACB" below)~~. Also included in Marina are two solar projects which are currently classified as held for sale,~~, and a ~~third~~ solar project that was sold in March 2020 (see ~~"Agreement to Sell~~"Sale of Solar Assets" below). The ~~significant~~principal wholly-owned subsidiaries of Marina ~~include:~~are:

•ACLE, BCLE, SCLE and SXLE, which own and operate landfill gas-to-energy production facilities in Atlantic, Burlington, Salem and Sussex Counties, respectively, located in New Jersey. On June 1, 2020, the BCLE, SCLE, and SXLE landfill ~~gas-to-energy-production~~gas-to-energy production facilities ceased operations after receiving approval from their respective local governmental authorities to do so.

•~~ESNJ-AL-Somerspoint LLC, ESNJ-AL-Hamiltonsquare LLC, and ESNJ-AL-Brownsmills LLC~~Entities which own and operate rooftop solar generation sites acquired in the second half of 2020, located in New Jersey. ~~These entities were acquired on June 30, 2020 (see "Acquisitions" below).~~

▪SJESP receives commissions on appliance service contracts from a third party.

▪Midstream invests in infrastructure and other midstream projects, including PennEast. See Note 3.

▪SJEI provides energy procurement and cost reduction services. The significant wholly-owned subsidiaries of SJEI include:

•AEP, an aggregator, broker and consultant in the retail energy markets ~~is a wholly-owned subsidiary~~that matches end users with suppliers for the procurement of ~~SJEI after completion of the AEP acquisition in August 2019.~~natural gas and electricity.

•EnerConnex, an aggregator, broker and consultant in the retail and wholesale energy markets that matches end users with suppliers for the procurement of natural gas and electricity. On August 7, 2020, SJEI acquired the remaining 75% of EnerConnex, of which SJEI previously held a 25% interest.

•SJI Renewable Energy Ventures, LLC and SJI RNG Devco, LLC, which hold our equity interest in REV and our renewable natural gas development rights in certain dairy farms, respectively.

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BASIS OF PRESENTATION - SJI's condensed consolidated financial statements include the accounts of SJI, its direct and indirect wholly-owned subsidiaries (including SJG) and subsidiaries in which SJI has a controlling interest. All significant intercompany accounts and transactions have been eliminated in consolidation. In management’s opinion, the condensed consolidated financial statements of SJI ~~is reporting on a consolidated~~and SJG reflect all normal recurring adjustments needed to fairly present their respective financial positions, operating results and cash flows at the dates and for the periods presented. SJI’s and SJG's businesses are subject to seasonal fluctuations and, accordingly, this interim financial information should not be the basis for estimating the ~~results of operations of the acquired entities discussed above as of the date of acquisition.~~full year’s operating results.

As permitted by the rules and regulations of the SEC, the accompanying unaudited condensed consolidated financial statements of SJI and SJG contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with GAAP. These financial statements should be read in conjunction with SJI’s and SJG's Annual Reports on Form 10-K for the year ended December 31, ~~2019. In management’s opinion,~~2020. There were no significant changes in or changes in the ~~condensed~~application of the Company’s significant or critical accounting policies or estimation procedures for the three months ended March 31, 2021 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements ~~of SJI and SJG reflect all normal recurring adjustments needed to fairly present their respective financial positions, operating results and cash flows at the dates and~~ for the ~~periods presented.~~

~~Table~~year ended December 31, 2020, except for the identification of ~~Contents~~

~~SJI’s and SJG's businesses are subject to seasonal fluctuations and, accordingly, this interim financial information should not be the basis for estimating the full year’s operating results.~~our segments as discussed in Note 6.

~~As of June 30, 2020~~Certain prior years' data presented in the financial statements and ~~December 31, 2019, SJI~~footnotes have been reclassified to conform to the current year presentation. These reclassifications had ~~assets and liabilities held for sale~~no impact on the ~~condensed consolidated balance sheets as a result~~Company's results of the agreements to sell that are discussed below. Unless otherwise noted, the disclosures herein related to specific asset and liability balances as of June 30, 2020 and December 31, 2019 exclude assets and liabilities held for sale. See "Assets and Liabilities Held for Sale" below for additional information including major classes of assets and liabilities classified as held for sale for both periods presented.operations, financial position or cash flows.

ESTIMATES AND ASSUMPTIONS - The condensed consolidated financial statements were prepared to conform with ~~GAAP. Management makes~~GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related disclosures. Therefore, actual results could differ from those estimates. Significant estimates include amounts related to regulatory accounting, energy derivatives, environmental remediation costs, legal contingencies, pension and other postretirement benefit costs, revenue recognition, goodwill, ~~and~~ evaluation of equity method investments for other-than-temporary ~~impairment.~~impairment, and allowance for credit losses. Estimates may be subject to future uncertainties, including the continued evolution of the COVID-19 pandemic and its impact on our operations and economic conditions, which could affect the fair value of the ETG reporting unit and its goodwill balance (see Note 17), as well as the allowance for credit losses and the total impact and potential recovery of incremental costs associated with COVID-19 (see Notes 5 and 8).

ACQUISITIONS - SJI had no acquisitions for the three months ended March 31, 2021 and 2020, respectively. For further discussion on prior acquisitions, refer to Note 1 "Summary of Significant Accounting Policies" of SJI's Annual Report on Form 10-K for the year ended December 31, 2020.

SALE OF SOLAR ASSETS - On June 27, 2018, the Company, through its wholly-owned subsidiary, Marina, entered into a series of agreements whereby Marina agreed to sell its then-existing portfolio of solar energy projects (for this section, the "Projects"), along with the assets comprising the Projects. These sales occurred during 2018-2020, including one project sold during the first quarter of 2020 for total consideration of $7.2 million. In connection with this transaction, Marina is leasing back from the buyer certain of the Projects that have not yet passed the fifth anniversary of their placed-in-service dates for U.S. federal income tax purposes. The leaseback runs from the date each such project was acquired by the buyer until the later of the first anniversary of the applicable acquisition date and the fifth anniversary of the applicable placed-in-service date of the project. As of March 31, 2021, there are 10 such projects being leased back from the buyer through the end of 2021, which is the fifth anniversary of their placed-in-service date. The results of these projects being leased back are not material.

SALE OF MTF & ACB - On February 18, 2020, the Company sold MTF and ACB to a third-party buyer for a final sales price of $97.0 million including working capital.

SALE OF ELK - On July 31, 2020, the Company sold ELK to a third-party buyer. Total consideration received in 2020 was approximately $15.6 million. The working capital settlement finalized in the first quarter of 2021 was not material.

IMPAIRMENT OF LONG-LIVED ASSETS - See Note 1 to the Consolidated Financial Statements under "Impairment of Long-Lived Assets" in Item 8 of the Form 10-K for the year ended December 31, 2020 for additional information regarding the Company's policy on impairments of long-lived assets. No impairments were identified at SJI or SJG for the three months ended March 31, 2021 and 2020, respectively.

See discussion of impairment considerations related to goodwill and other intangible assets in Note 17.

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REGULATION - ~~SJG and ETG~~The Utilities are subject to the rules and regulations of the BPU ~~while ELK is subject to the rules and regulations of the MPSC.~~. See Note 7 for a discussion of the Utilities' rate structure and regulatory actions. The Utilities maintain their accounts according to the BPU's ~~and MPSC's~~ prescribed Uniform System of Accounts. The Utilities follow the accounting for regulated enterprises prescribed by ASC 980, Regulated Operations~~. In general, Topic 980~~, which allows for the deferral of certain costs (regulatory assets) and creation of certain obligations (regulatory liabilities) when it is probable that such items will be recovered from or refunded to customers in future ~~periods.~~periods. See Note 8 for ~~a detailed discussion of~~more information related to regulatory assets and liabilities.

ACQUISITIONS - On June 30, 2020, SJI, through its wholly-owned subsidiary Marina, acquired ESNJ-AL-Somerspoint LLC, ESNJ-AL-Hamiltonsquare LLC, and ESNJ-AL-BrownsMills LLC, which own and operate solar-generation sites as noted above, for $2.8 million in total consideration. See Note 17. These entities are separate from the solar assets and projects that are discussed under "Agreement to Sell Solar Assets."

~~On August 31, 2019, SJI, through its wholly-owned subsidiary SJEI, completed its acquisition of AEP for $4.0 million in total consideration.~~

AGREEMENT TO SELL SOLAR ASSETS - See Note 1 to the Consolidated Financial Statements under "Agreement to Sell Solar Assets" in Item 8 of the Form 10-K for the year ended December 31, 2019 for additional information regarding SJI’s agreement to sell its portfolio of solar energy assets (each, a "Project" and, in total, the "Transaction").

During the first six months of 2020, 1 Project was sold for total consideration of $7.2 million, which was the net book value of the asset on the date of sale. The solar assets related to this Project were recorded as Assets Held for Sale on the condensed consolidated balance sheets as of December 31, 2019. During the first six months of 2019, 7 Projects were sold for total consideration of $24.3 million.

The Company currently has 2 solar projects that are not part of the Transaction but are expected to be sold in 2020. The solar assets related to these 2 projects were recorded as Assets Held for Sale on the condensed consolidated balance sheets as of both June 30, 2020 and December 31, 2019, where they will remain until they are transferred to a buyer.

AGREEMENT TO SELL MTF & ACB - In December 2019, the Company announced it had entered into an agreement to sell MTF and ACB to a third-party buyer for an initial sales price of $100.0 million, which includes working capital. This sale closed on February 18, 2020 for a final sales price of $97.0 million, with the initial sales price being reduced by the amount of cash flows generated by MTF and ACB from October 1, 2019 through the date of closing. These unsold assets and liabilities were recorded as Assets Held for Sale and Liabilities Held for Sale, respectively, on the condensed consolidated balance sheets as of December 31, 2019.

AGREEMENT TO SELL ELK - In December 2019, the Company announced it had entered into an agreement to sell ELK to a third-party buyer. The MPSC approved this transaction during the second quarter of 2020 (see Note 7), and the transaction closed on July 31, 2020 (see Note 20). The assets and liabilities for ELK were recorded as Assets Held for Sale and Liabilities Held for Sale, respectively, on the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

~~Table of Contents~~

ASSETS AND LIABILITIES HELD FOR SALE - As discussed above, SJI is involved in the sale and/or potential sale of solar assets, MTF & ACB, and ELK and has recorded the following in Assets Held for Sale and Liabilities Held for Sale on the condensed consolidated balance sheets as of June 30, 2020 (ELK and 2 solar projects) and December 31, 2019 (ELK, MTF & ACB, and 3 solar projects):

June 30, 2020 December 31, 2019
Assets Held for Sale:
   Current Assets $ — $ 5,365
   Net Utility Plant 19,335 18,692
   Net Nonutility Property, Plant & Equipment 19,993 110,400
   Goodwill 59 59
   Regulatory Assets 638 415
   Other Noncurrent Assets 19 8,509
      Total Assets Held for Sale $ 40,044 $ 143,440
Liabilities Held for Sale:
   Current Liabilities $ — $ 916
   Asset Retirement Obligations 2,609 2,515
   Regulatory Liabilities 3,246 2,583
   Other Noncurrent Liabilities 7 29
      Total Liabilities Held for Sale $ 5,862 $ 6,043

IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets that are held and used are reviewed for impairment whenever events or changes in circumstances indicate carrying values may not be recoverable. We performed a qualitative assessment of the long-lived assets of SJI and SJG as of June 30, 2020 to determine whether the impact of the COVID-19 pandemic, and the resulting fluctuations in market conditions, indicate that the fair value of the assets are less than their carrying value. There were no indicators noted through these qualitative assessments that indicate an impairment has occurred.

~~NaN impairments were identified at either SJI or SJG for the three and six months ended June 30, 2020 or 2019, respectively.~~

OPERATING REVENUES - Gas and electric revenues are recognized in the period the commodity is delivered to customers. For retail customers (including SJG) that are not billed at the end of the month, we record an estimate to recognize unbilled revenues for gas and electricity delivered from the date of the last meter reading to the end of the month. The Utilities also have revenues that arise from alternative revenue programs, which are discussed ~~further~~ in Note ~~16.~~15. For ETG and SJG, unrealized gains and losses on energy-related derivative instruments are recorded in Regulatory Assets or Regulatory Liabilities on the condensed consolidated balance sheets of SJI and SJG (see Note 12) until they become realized, in which case they are recognized in operating revenues. SJRG's gas revenues are recognized in the period the commodity is ~~delivered. Realized~~delivered, and operating revenues for SJRG include realized and unrealized gains and losses on energy-related derivative ~~instruments are also recognized in operating revenues for SJRG.~~instruments. SJRG presents revenues and expenses related to its energy trading activities on a net basis in operating revenues. This net presentation has no effect on operating income or net income. The Company recognizes revenues on commissions received related to SJESP appliance service contracts from a third party, along with AEP and EnerConnex energy procurement service contracts from a third party, on a monthly basis as ~~these~~the commissions are earned. Marina recognizes revenue for renewable energy projects when output is generated and delivered to the customer, and when renewable energy credits have been transferred to the third party at an agreed upon price.

~~We considered the impact the COVID-19 pandemic has had on operating revenues, noting that~~ SJI and SJG have not seen a significant reduction in revenues as a result of the COVID-19 pandemic. This is due to the delivery of gas and electricity being considered an essential service, ~~and continuing to be delivered timely~~with delivery to customers ~~and~~continuing in a timely manner with no delays or operational shutdowns taking place to date. Given the performance obligation is satisfied at delivery, which matches the time when the Company is able to invoice the customer, the Company is confident in being able to meet its future performance obligations. To the extent that the pandemic does impact our ability to deliver in the future, operating revenues could be impacted.

~~Table of Contents~~

~~ARO - The amounts included under ARO are primarily related to~~ Currently, the legal obligations SJI and SJG have to cut and cap gas distribution pipelines when taking those pipelines out of service in future years. These liabilities are generally recognized upon the acquisition or constructionimpact of the ~~asset, or when management has adequate information~~pandemic on the collectability of our accounts receivable continues to be monitored, but such receivables have traditionally been included in order to make an estimate of the obligation. The related asset retirement cost is capitalized concurrently by increasing the carrying amount of the related asset by the same amount as the liability. Changes in the liability are recorded for the passage of time (accretion) or for revisions to cash flows originally estimated to settle the ARO.

~~ARO activity for the six months ended June 30, 2020 as follows (in thousands):~~rate recovery (see Note 8).



~~SJI (includes SJG and all other consolidated subsidiaries):~~		~~2020~~
~~ARO as of January 1,~~		$	~~263,950~~
~~Accretion~~		~~6,074~~
~~Additions~~		~~2,012~~
~~Settlements~~		~~(5,152)~~
~~Revisions in Estimated Cash Flows (A)~~		~~(72,577)~~
~~ARO as of June 30,~~		$	~~194,307~~


~~SJG:~~		~~2020~~
~~ARO as of January 1,~~		$	~~96,509~~
~~Accretion~~		~~2,042~~
~~Additions~~		~~1,161~~
~~Settlements~~		~~(1,142)~~
~~Revisions in Estimated Cash Flows (A)~~		~~(18,751)~~
~~ARO as of June 30,~~
$	~~79,819~~

(A) The revisions in estimated cash flows for SJI and SJG for the six months ended June 30, 2020 shown in the table above reflect decreases in the estimated retirement costs primarily as a result of changes in contractor costs to settle the ARO liability. Corresponding entries were made to Regulatory Assets and Utility Plant, thus having no impact on earnings.

TREASURY STOCK - SJI uses the par value method of accounting for treasury stock. As of June 30, 2020 and December 31, 2019, SJI held 248,411 and 231,514 shares of treasury stock, respectively. These shares are related to deferred compensation arrangements where the amounts earned are held in the stock of SJI.

AFUDC - SJI and SJG record AFUDC, which represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently, AFUDC increases the regulated revenue requirement and is included in rate base and recovered over the service life of the asset through a higher rate base and higher depreciation.

~~INCOME~~0INCOME TAXES - Deferred income taxes are provided for all significant temporary differences between the book and taxable bases of assets and liabilities in accordance with ASC 740, Income Taxes. Certain deferred income taxes are recorded with offsetting regulatory assets or liabilities by the Company to recognize that income taxes will be recovered or refunded through future rates. A valuation allowance is ~~established~~recorded when ~~it is determined that~~ it is more likely than not that aany of SJI's or SJG's deferred tax ~~asset~~assets will not be realized.

GOODWILL - ~~See~~See Note ~~18.~~17.

~~AMA~~LEASES - ~~On July~~There have been no significant changes to the nature or balances of the Company's leases since December 31, 2020, which are described in Notes 1 ~~2018, SJRG purchased from a third party an AMA whereby SJRG manages~~and 9 to the ~~pipeline capacity~~Consolidated Financial Statements in Item 8 of ~~ETG. Total cash payment was $11.3 million. The AMA expires~~SJI’s and SJG's Annual Report on ~~March~~Form 10-K for the year ended December 31, 2022. Under the AMA, SJRG pays ETG an annual fee of $4.25 million, plus additional profit sharing as defined in the AMA. The amounts received by ETG will be credited to its BGSS clause and returned to its ratepayers. The total purchase price was allocated as follows (in thousands):2020.


~~Natural Gas in Storage~~		$	~~9,685~~
~~Intangible Asset~~		~~19,200~~
~~Profit Sharing - Other Liabilities~~		~~(17,546)~~
~~Total Consideration~~		$
	~~11,339~~

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As of June 30, 2020 and December 31, 2019, the balance of the intangible asset is $9.0 million and $11.5 million, respectively, and is recorded to Other Current and Noncurrent Assets on the condensed consolidated balance sheets of SJI, with the reduction being due to amortization. As of June 30, 2020 and December 31, 2019, the balance in the liability is $8.5 million and $10.6 million, respectively, and is recorded to Regulatory Liabilities on the condensed consolidated balance sheets of SJI, with the change resulting from profit sharing earned.

VSIP - SJG entered into a VSIP program with IBEW Local 1293 and IAM Local 76 union employees over the age of 60 years old with 10 or more years of service to SJG. Communication was made to these employees in both the first and second quarter 2020, with acceptance made by the Local 1293 employees by April 14, 2020 and by the Local 76 employees by May 6, 2020. Total cost to SJG for the VSIP was $0.6 million, all of which related to employees of SJG and was included in Operations Expense on the condensed consolidated statements of income (loss) of SJI and SJG for the three and six months ended June 30, 2020.

THIRD PARTY GAS SUPPLIER REFUND - During the second quarter of 2020, a third party pipeline capacity supplier that is utilized by the Utilities and the wholesale energy operations at SJRG in the normal course of business settled its rate case with the FERC. As part of the executed settlement, the third party supplier was ordered to refund customers for over billings on transportation costs that had been charged during the rate case period. As a result, in June 2020, SJRG and SJG received notification from the supplier that refunds totaling approximately $11.2 million and $10.0 million, respectively, would be received. SJRG and SJG received the refunds in July 2020. Of the total SJRG refund, approximately $7.1 million will be remitted to ETG under the terms of the AMA (see above). As transportation costs incurred by ETG under the AMA can be recovered from ratepayers under its BGSS rate mechanism, the $7.1 million was recorded as an increase to ETG's Regulatory Liabilities as of June 30, 2020 (see Note 8). For the remaining $3.9 million retained by SJRG, approximately $3.8 million was recorded as Operating Revenues; as noted above, SJRG presents revenues and expenses related to its energy trading activities on a net basis in Operating Revenues. The remaining $0.1 million in interest was recorded in Other Income. As SJG also recovers these costs through its BGSS rate mechanism, the $10.0 million refund was recorded as a reduction to SJG's Regulatory Assets as of June 30, 2020 (see Note 8).

CURRENT PORTION OF LONG-TERM DEBT & SHORT-TERM BORROWINGS - As of June 30, 2020, the Company had $117.9 million of long-term debt that was due within one year ("current portion"), along with $452.8 million of notes payable which included borrowings under the commercial paper program and revolving credit facilities ("short-term borrowings"; see Note 10). As of December 31, 2019, the Company had $467.9 million of current portion and $848.7 million of short-term borrowings. This reduction is the result of SJI refinancing $600.0 million of short-term and current portion amounts that were outstanding as of December 31, 2019, including $400.0 million at SJG (see Note 14), with the remainder being paid down using proceeds from the agreements to sell assets discussed above. SJI expects to further reduce its debt and notes payable over the next twelve months using cash provided from the sale of ELK and the remaining solar assets as discussed above. The remaining portion of long-term debt that is due within one year is expected to be paid by utilizing funds provided from refinancing activities and from the Company's revolving credit facilities.

Although there can be no assurance, management believes that actions presently being taken to pay off or refinance the long-term debt and borrowings that are due within the next year will be successful, as the Company has been successful in refinancing debt in the past. No adjustments have been made to the financial statements to account for this uncertainty.

~~AOCL - SJI and SJG release income tax effects from AOCL on an individual unit of account basis.~~

NEW ACCOUNTING PRONOUNCEMENTS - Other than as described below, no new accounting pronouncement had, or is expected to have, a material impact on the condensed consolidated financial statements of SJI, or the condensed financial statements of SJG.

~~Recently Adopted Standards:~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. SJI and SJG adopted this guidance on January 1, 2020, consistent with the effective date. Adoption of this guidance did not have an impact on the financial statement results of SJI or SJG.

2522

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Recently Adopted Standards:

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement~~. This ASU modifies the disclosure requirements on the timing of liquidation of an investee's assets and the description of measurement uncertainty at the reporting date. Entities are now required to disclose: (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements; and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Further, the standard eliminates disclosure requirements with respect to: (1) the transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation process for Level 3 fair value measurements. The new disclosure requirement for unrealized gains and losses, the range and weighted average of significant unobservable inputs and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively to all periods presented upon their effective date. SJI and SJG adopted this guidance on January 1, 2020, consistent with the effective date. Adoption of this guidance did not have an impact on the financial statement results of SJI or SJG.

~~In April 2019, the FASB issued ASU 2019-04,~~ ~~Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this ASU provide codification improvements and further clarification on several topics, including ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, as well as ASU 2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10)~~. Since SJI and SJG adopted the amendments in ASU 2017-12 (with no impact to the financial statement results of SJI or SJG) as of April 25, 2019 (the issuance date of ASU 2019-04), the remaining amendments became effective and were adopted by SJI and SJG on January 1, 2020. Adoption of this guidance did not have an impact on the financial statement results of SJI or SJG. See ASU 2016-13 below for more detail.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, as amended. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to develop credit loss estimates. An entity will apply the amendment through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 was effective for SJI and SJG beginning on January 1, 2020. The impact of adoption did not result in an adjustment to retained earnings for either SJI or SJG as of January 1, 2020.

~~Standards Not Yet Effective:~~

~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plan.~~ This ASU eliminates requirements for certain disclosures such as the amount and timing of plan assets expected to be returned to the employer and the amount of future annual benefits covered by insurance contracts. The standard adds new disclosures that provide information relating to the weighted-average interest crediting rate for cash balance plans and other plans with promised interest crediting rates and an explanation for significant gains or losses related to changes in the benefit obligations for the period. The standard is effective for the annual disclosures for fiscal years ending after December 15, 2020. Management is currently determining the impact that adoption of this guidance will have on the financial statements of SJI and SJG.

~~In January 2020, the FASB issued ASU 2020-01,~~ Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this ASU clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments in this ASU also clarify that for the purposes of applying Topic 815, an entity should not consider whether, upon the settlement of a forward contract or exercise of a purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825. The standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, for public companies. Early adoption is permitted, including early adoption in an interim period. Management is currently determining the impact that adoption of this guidance will have on the financial statements of SJI and SJG.

Standard

Description

Date of Adoption

Application

Effect on the Financial Statements of SJI and SJG

ASU 2019-12:
Simplifying the Accounting for Income Taxes

This ASU removes exceptions related to the incremental approach for intraperiod tax allocation, the requirement to recognize a deferred tax liability for changes in ownership of a foreign subsidiary or equity method investment, and the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss. The guidance also adds requirements to reflect changes to tax laws or rates in the annual effective tax rate computation in the interim period in which the changes were enacted, to recognize franchise or other similar taxes that are partially based on income as an income-based tax and any incremental amounts as non-income-based tax, and to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction.

January 1, 2021

Modified retrospective for amendments related to changes in ownership of a foreign subsidiary or equity method investment; Modified retrospective or retrospective for amendments related to taxes partially based on income; Prospective for all other amendments

Adoption of this guidance did not have a material impact on the financial statement results of SJI or SJG.

ASU 2020-01:

Clarifying the Interactions between Topic 321 (Investments - Equity Securities), Topic 323 (Investments - Equity Method and Joint Ventures), and Topic 815 (Derivatives and Hedging)

The amendments in this ASU clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments in this ASU also clarify that for the purposes of applying Topic 815, an entity should not consider whether, upon the settlement of a forward contract or exercise of a purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825.

January 1, 2021

Prospective

Adoption of this guidance did not have a material impact on the financial statement results of SJI or SJG.

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~~In March 2020, the FASB issued ASU 2020-04,~~ Standards Not Yet Effective:

Standard

Description

Date of Adoption

Application

Effect on the Financial Statements of SJI and SJG

ASU 2020-04:

Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting

ASU 2021-01: Reference Rate Reform (Topic 848)

The amendments in ASU 2020-04 provide various optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to changes in the interest rates used for margining, discounting, or contract price alignment for derivative instruments that are being implemented as part of the market-wide transition to new reference rates (commonly referred to as the "discounting transition").

March 12, 2020 through December 31, 2022

An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.

Prospective for contract modifications and hedging relationships. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic.

Management is currently determining the impact that adoption of this guidance will have on the financial statements of SJI and SJG, including forming an implementation team that is evaluating the impact of the guidance on our current contracts. Management is also evaluating timing of adoption.

Table of ~~the Effects of Reference Rate Reform on Financial Reporting~~Contents

ASU 2020-06: Accounting for Convertible Instruments and Contracts in an Entity's Own Equity

The amendments in this ASU simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20. Under the amendments, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The amendments also add new convertible instrument disclosure requirements. Additionally, the amendments in this ASU remove certain conditions from the settlement guidance within the derivative scope exception guidance contained in Subtopic 815-40 and further clarify the derivative scope exception guidance. Finally, the amendments in this ASU align the diluted EPS calculation for convertible instruments by requiring that an entity use the if-converted method instead of the treasury stock method when calculated diluted EPS for convertible instruments.

January 1, 2022; early adoption permitted, but not before January 1, 2021.

Retrospective or Modified Retrospective

Management is currently determining the impact that adoption of this guidance will have on the financial statements of SJI and SJG

. The amendments in this ASU provide various optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. An entity may elect to apply the amendments in this Update to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. Management has not yet adopted this guidance and is currently determining when to adopt it for SJI and SJG, and is currently determining the impact that adoption of this guidance will have on the financial statements of SJI and SJG.

2. STOCK-BASED COMPENSATION PLAN:

Under SJI's ~~2015~~ Omnibus Equity Compensation Plan (Plan), sharesmay be issued to SJI’s officers (Officers), non-employee directors (Directors) and other key employees. NaN options were granted or outstanding during the six months ended June 30, 2020 and 2019. NaN stock appreciation rights have been issued under the Plan. During the six months ended June 30, 2020 and 2019, SJI granted 225,278 and 181,387 total restricted shares, respectively, to Officers and other key employees under the Plan.

SJI grants time-based shares of restricted stock, one-third of which vest annually over a ~~three-year~~three-year period and which are limited to a 100% payout. The vesting and payout of time-based shares of restricted stock is solely contingent upon the service requirement being met in years one, two, and three of the grant. During the six months ended June 30, 2020 and 2019, Officers and other key employees were granted 105,451 and 85,146 shares of time-based restricted stock, respectively, which are included in the total restricted shares noted above.

Performance-based restricted shares vest over a ~~three-year~~three-year period and are subject to SJI achieving certain market and earnings-based performance targets, which can cause the actual amount of shares that ultimately vest to range from 0% to 200% of the original shares granted. ~~During~~NaN options were granted or outstanding, and 0 restricted shares (time-based or performance-based) were granted during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019,~~2020. NaN stock appreciation rights have been issued under the Plan. Restricted shares to Officers and other key employees ~~were~~are expected to be granted ~~119,827 and 96,241 shares of performance-based restricted stock, respectively, which are included~~ in the ~~total restricted shares noted above.~~second quarter of 2021.

Grants containing market-based performance targets use SJI's TSR relative to a peer group to measure performance. As TSR-based grants are contingent upon market and service conditions, SJI is required to measure and recognize stock-based compensation expense based on the fair value at the date of grant on a straight-line basis over the requisite ~~three-year~~three-year period of each award. In addition, SJI identifies specific forfeitures of share-based awards, and compensation expense is adjusted accordingly over the requisite service period. Compensation expense is not adjusted based on the actual achievement of ~~performance~~market goals. The fair value of TSR-based restricted stock awards on the date of grant is estimated using a Monte Carlo simulation model.

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Earnings-based performance targets include pre-defined EGR ~~and ROE~~ goals to measure performance. Performance targets include pre-defined CEGR for SJI. As EGR-based ~~ROE-based~~ and CEGR-based grants are contingent upon performance and service conditions, SJI is required to measure and recognize stock-based compensation expense based on the fair value at the date of grant over the requisite ~~three-year~~three-year period of each award. The fair value is measured as the market price at the date of grant. The initial accruals of compensation expense are based on the estimated number of shares expected to vest, assuming the requisite service is rendered and probable outcome of the performance condition is achieved. That estimate is revised if subsequent information indicates that the actual number of shares is likely to differ from previous estimates. Compensation expense is ultimately adjusted based on the actual achievement of service and performance targets.

During the ~~six~~three months ended ~~June 30,~~March 31, 2021, SJI did not grant any restricted shares to its Directors; however 54,419 shares were issued in April 2021. During the three months ended March 31, 2020, ~~and 2019,~~ SJI granted 36,829 ~~and 30,028~~ restricted shares ~~respectively,~~ to its Directors. Shares issued to Directors vest over twelve months and contain no performance conditions. As a result, 100% of the shares granted generally vest.

~~Table of Contents~~

The following table summarizes the nonvested restricted stock awards outstanding ~~for SJI~~ at ~~June 30, 2020~~March 31, 2021, and the assumptions used to estimate the fair value of the awards:


		Grants	Shares Outstanding	Fair Value Per Share		Expected Volatility		Risk-Free Interest Rate			Grants	Shares Outstanding	Fair Value Per Share		Expected Volatility		Risk-Free Interest Rate
Officers & Key Employees -	Officers & Key Employees -	2018 - TSR	48,304	$	31.05	21.9	%	2.00	%	Officers & Key Employees -	2019 - TSR	32,292	$	32.88	23.2	%	2.40	%
		2018 - CEGR, Time	63,389	$	31.23	N/A		N/A			2019 - CEGR, Time	69,496	$	31.38	N/A		N/A
		2019 - TSR	36,642	$	32.88	23.2	%	2.40	%		2020 - TSR	41,306	$	25.51	34.8	%	0.21	%
		2019 - CEGR, Time	101,982	$	31.38	N/A		N/A			2020 - CEGR, Time	169,164	$	25.19	N/A		N/A
		2020 - TSR	119,827	$	25.51	34.8	%	0.21	%
		2020 - Time	105,451	$	25.19	N/A		N/A

Directors -	Directors -	2020	36,829	$	32.42	N/A		N/A		Directors -	2020	1,627	$	24.20	N/A		N/A

Expected volatility is based on the actual volatility of SJI’s share price over the preceding ~~three-year~~three-year period as of the valuation date. The risk-free interest rate is based on the zero-coupon U.S. Treasury Bond, with a term equal to the ~~three-year~~three-year term of the Officers’ and other key employees’ restricted shares. As notional dividend equivalents are credited to the holders during the ~~three-year~~three-year service period, no reduction to the fair value of the award is required. As the Directors’ restricted stock awards contain no performance conditions and dividends are paid or credited to the holder during the ~~requisite~~twelve month service period, the fair value of these awards is equal to the market value of the shares on the date of grant.

The following table summarizes the total stock-based compensation cost to SJI for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Officers & Key Employees $ 1,239 $ 1,534 $ 2,451 $ 2,284
Directors 298 202 597 404
Total Cost 1,537 1,736 3,048 2,688
Capitalized 99 47 (23) (34)
Net Expense $ 1,636 $ 1,783 $ 3,025 $ 2,654

~~The table above does not reflect the reversal of approximately $1.3 million in 2020 of previously recorded costs associated with TSR and CEGR-based grants for which performance goals were not met.~~


	Three Months Ended March 31,
	2021		2020
Officers & Key Employees	$	1,264	$	1,212
Directors	10		299
Total Cost	1,274		1,511

Capitalized	(23)		(122)
Net Expense	$	1,251	$	1,389

As of ~~June 30, 2020,~~March 31, 2021, there was ~~$8.5~~$4.2 million of total unrecognized compensation cost related to nonvested stock-based compensation awards granted under the Plan. That cost is expected to be recognized over a weighted average period of ~~1.9~~1.5 years.

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The following table summarizes information regarding restricted stock award activity for SJI during the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, excluding accrued dividend equivalents:

Officers and Other Key Employees Directors Weighted
Average
Fair Value
Nonvested Shares Outstanding, January 1, 2020 402,146 30,961 $ 31.50
  Granted 225,278 36,829 $ 26.42
  Cancelled/Forfeited (14,867) — $ 31.48
  Vested* (136,963) (30,961) $ 31.49
Nonvested Shares Outstanding, June 30, 2020 475,594 36,829 $ 28.90


	Officers and Other Key Employees	Directors	Weighted Average Fair Value
Nonvested Shares Outstanding, January 1, 2021	449,786	38,456	$	28.88


Vested	(137,529)	(36,829)	$	31.45
Nonvested Shares Outstanding, March 31, 2021	312,257	1,627	$	27.45

*Earnings and performance-based targets during the ~~three-year vesting periods~~Time-based grants were ~~not attained~~awarded for ~~the 2017 Officer~~Officers and other key ~~employee grants that vested in the first quarter of 2020. As a result, no shares were awarded in 2020 associated with the 2017 TSR and CEGR-based grants.~~

~~The targets for the time-based grants were met.~~employees who met their service period requirements. As a result, during the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, SJI awarded ~~72,145~~110,891 shares to its Officers and other key employees at a market value of ~~$2.0~~$2.7 million. During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, SJI awarded ~~125,288~~47,617 shares at a market value of ~~$3.7~~$1.4 million. These awarded amounts for ~~2020~~2021 and ~~2019~~2020 include awards for previously deferred shares that were paid during the ~~six~~three month periods.

~~During the six months ended June 30, 2020 and 2019,~~ SJI also awarded 36,829 and 30,961 ~~and 26,416~~service based award shares to its Directors at a market value of $1.2 million and $0.8 million ~~for both periods.~~during the three months ended March 31, 2021 and March 31, 2020, respectively.

SJI has a policy of issuing new shares to satisfy its obligations under the Plan; therefore, there are no cash payment requirements resulting from the normal operation of the Plan. However, a change in control could result in such shares becoming non-forfeitable or immediately payable in cash. At the discretion of the Officers, Directors and other key employees, the receipt of vested shares can be deferred until future periods. These deferred shares are included in Treasury Stock on the condensed consolidated balance sheets.

SJG - Officers and other key employees of SJG participate in the stock-based compensation plans of SJI. During the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~there were 0 restricted shares granted to SJG officers and other key ~~employees were~~employees; shares are expected to be granted ~~7,902 and 6,095 shares~~in the second quarter of ~~SJI restricted stock, respectively, which had an immaterial impact to SJG's financial statements for both the six months ended June 30, 2020 and 2019.~~2021.

3. AFFILIATIONS, DISCONTINUED OPERATIONS AND RELATED-PARTY TRANSACTIONS:

AFFILIATIONS — The following affiliated entities are accounted for under the equity method:

PennEast - Midstream has a 20% investment in PennEast. SJG and ETG are each parties to a precedent capacity agreement with PennEast. The following events have occurred with respect to ~~PennEast in recent months:~~PennEast:

•On September 10, 2019, the U.S. Court of Appeals for the Third Circuit ruled that PennEast does not have eminent domain authority over NJ state-owned lands. A Petition for Rehearing En Banc was denied by the U.S. Court of Appeals for the Third Circuit on November 5, 2019.

•On October 8, 2019, the NJDEP denied and closed PennEast’s application for several permits without prejudice, citing the Third Circuit ~~Court~~ decision. On October 11, 2019, PennEast submitted a letter to the NJDEP objecting to its position that the application is administratively incomplete. PennEast's objections were rejected by the NJDEP on November 18, 2019.

•In December 2019, PennEast asked the FERC for a ~~two-year~~two-year extension to construct the pipeline.

•On January 30, 2020, the FERC voted to approve PennEast’s petition for a declaratory order and expedited action requesting that ~~the body~~FERC issue an order interpreting the Natural Gas Act’s eminent domain authority. On the same day, PennEast filed an amendment with the FERC to construct PennEast in two phases. Phase one consists of construction of a pipeline in Pennsylvania from the eastern Marcellus Shale region in Luzerne County that would terminate in Northampton County. Phase two includes construction of the remaining original certificated route in Pennsylvania and New Jersey. Construction is expected to begin following approval by the FERC of the phased approach and receipt of any remaining governmental and regulatory permits.

~~Table of Contents~~

•On February 18, 2020, PennEast filed a Petition for a Writ of Certiorari with the Supreme Court of the United States ("petition") to review the September 10, 2019 Third Circuit decision.

•On February 20, 2020, the FERC granted PennEast’s request for a ~~two-year~~two-year extension to complete the construction of the pipeline.

•On April 14, 2020, The USU.S. Supreme Court ordered the state of New Jersey to respond to PennEast's petition. The court directed NJ respondents, including state agencies and the NJ Conservation Foundation, to answer the petition by PennEast. The state responded on June 2.2, 2020.

•~~On June 25, 2020, the Supreme Court examined the PennEast case to determine if it would review the decision by the U.S. Court~~Table of ~~Appeals for the Third Circuit.~~Contents

•On June 29, 2020, the U.S. Supreme Court invited the USU.S. Solicitor General to file a brief expressing the views of the United States.

•On December 9, 2020 the Solicitor General filed a brief supporting PennEast's petition for a Writ of Certiorari.

•On December 23, 2020 the NJ Attorney General filed a brief with the Supreme Court in response to the brief of the Solicitor General.

•On February 3, 2021, the Supreme Court granted PennEast's petition for a Writ of Certiorari. The matter was argued before the Supreme Court on April 28, 2021 and is currently pending.

PennEast management remains committed to pursuing the project and intends to pursue all available options. SJI, along with the other partners, are intending to contribute to the project.

Our investment in PennEast totaled ~~$86.9~~$93.2 million and ~~$82.7~~$91.3 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. At ~~June 30, 2020,~~March 31, 2021, the Company evaluated its investment in PennEast for impairment and determined there is not a triggering event for other-than-temporary impairment, and has not recorded any impairment charge to reduce the carrying value of our investment. Our evaluation considered that the pending legal and regulatory proceedings are ongoing, and the intent is to move forward with all potential legal and regulatory proceedings and other options available. Our evaluation also considered the current economic conditions as a result of COVID-19, noting that the timelines, potential options and legal and regulatory proceedings have not been materially impacted. However, it is reasonably possible that the legal and regulatory proceedings could have unfavorable outcomes, or there could be other future unfavorable developments, such as a reduced likelihood of success from development options and legal outcomes, estimated increases in construction costs, increases in the discount rate, or further significant delays, or PennEast could conclude that the project is not viable or does not go forward as actions progress. These could impact our conclusions with respect to other-than-temporary impairment and may require that we recognize an impairment charge of up to our recorded investment in the project, net of any cash and working capital. We will continue to monitor and update this analysis as required. Different assumptions could affect the timing and amount of any charge recorded in a period.

Energenic - Marina and a joint venture partner formed Energenic, in which Marina has a 50% equity interest. Energenic developed and operated on-site, self-contained, energy-related projects. Energenic currently does not have any projects that are operational.

Millennium - SJI and a joint venture partner formed Millennium, in which SJI has a 50% equity interest. Millennium reads utility customers’ meters on a monthly basis for a fee.

Potato Creek - ~~SJI~~SJEX and a joint venture partner formed Potato Creek, in which ~~SJI~~SJEX has a 30% equity interest. Potato Creek owns and manages the oil, gas and mineral rights of certain real estate in Pennsylvania.

EnergyMark - SJE has a 33% investment in EnergyMark, an entity that acquires and markets natural gas to retail end users.

SJRG had net sales to EnergyMark of ~~$3.5~~$7.4 million and ~~$5.3~~$5.2 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, respectively.

REV - SJI Renewable Energy Ventures, LLC has a 35% equity interest in REV, an LNG distributor and ~~2019, respectively~~developer of LNG and ~~$8.7 million~~RNG assets and ~~$19.2 million for the six months ended June 30, 2020 and 2019, respectively.~~projects.

~~EnerConnex~~AFFILIATE TRANSACTIONS - ~~SJEI has a 25% investment in EnerConnex, which is a retail~~Investments made and ~~wholesale broker and consultant that matches end users with suppliers~~repayments from unconsolidated affiliates for the ~~procurement of natural gas~~three months ended March 31, 2021 and ~~electricity.~~2020 were not material.

~~During the first six months of both 2020 and 2019, SJI made net investments in unconsolidated affiliates of $2.0 million and $3.9 million, respectively.~~ As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the outstanding balance of Notes Receivable – Affiliate was ~~$15.4~~$33.4 million and ~~$18.1~~$33.9 million, respectively. These Notes Receivable-Affiliates balances are ~~broken out as follows:~~comprised of:

•As of ~~both June 30, 2020~~March 31, 2021 and December 31, ~~2019, $13.1~~2020, $11.9 million and $12.1 million, respectively, of notes are related to ~~Energenic, which~~Energenic; such notes are secured by Energenic's cogeneration assets for energy service projects, accrue interest at 7.5% and are to be repaid through 2025. ~~As of both June 30, 2020 and December 31, 2019, $4.4 million of interest~~Current losses at Energenic are offset against the Notes Receivable – Affiliate balance as our investment in the Energenic affiliate has been ~~accrued and is recorded in Accounts Receivable on the condensed consolidated balance sheets. No payments have been made on this note~~reduced to 0 as a result of ~~June 30, 2020.~~previous losses.

•As of ~~June 30, 2020~~both March 31, 2021 and December 31, ~~2019,~~2020, $19.3 million of the ~~remaining $2.3~~notes related to REV, which accrue interest at variable rates. See "Affiliate Loans" in Note 11.

•As of March 31, 2021 and December 31, 2020, $2.2 million and ~~$5.0~~$2.5 million, respectively, of ~~these~~unsecured notes ~~are unsecured and~~which accrue interest at variable rates.

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SJI holds significant variable interests in these entities but is not the primary beneficiary. Consequently, these entities are accounted for under the equity method because SJI does not have both (a) the power to direct the activities of the entity that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity that could potentially be significant to the entity or the right to receive benefits from the entity that could potentially be significant to the entity. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, SJI had a net asset of approximately ~~$91.3~~$112.9 million and ~~$87.1~~$106.2 million, respectively, included in Investment in Affiliates on the condensed consolidated balance sheets related to equity method ~~investees, in addition to Notes Receivable – Affiliate as discussed above.~~investees. SJI’s maximum exposure to loss from these entities as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 is limited to its combined investments in these entities and the Notes Receivable-Affiliate in the aggregate amount of ~~$106.7~~$146.3 million and ~~$105.2~~$140.1 million, respectively.

DISCONTINUED OPERATIONS - ~~Discontinued Operations consist of the environmental remediation activities related~~There have been no significant changes to the ~~properties~~nature or balances of ~~SJF~~SJI's discontinued operations since December 31, 2020, which are defined and ~~the product liability litigation and environmental remediation activities related~~described in Note 3 to the ~~prior business~~Consolidated Financial Statements in Item 8 of ~~Morie. SJF is a subsidiary of EMI, an SJI subsidiary, which previously operated a fuel oil business. Morie is~~SJI’s and SJG's Annual Report on Form 10-K for the ~~former sand mining and processing subsidiary of EMI. EMI sold the common stock of Morie in 1996.~~year ended December 31, 2020.

~~SJI conducts tests annually to estimate the environmental remediation costs for these properties (see Note 11).~~

~~Summarized operating results of the discontinued operations for the three and six months ended June 30, 2020 and 2019, were (in thousands, except per share amounts):~~

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Loss before Income Taxes:
Sand Mining $ (17) $ (23) $ (36) $ (44)
Fuel Oil (60) (96) (116) (153)
Income Tax Benefits 16 24 32 40
Loss from Discontinued Operations — Net $ (61) $ (95) $ (120) $ (157)
Earnings Per Common Share from
Discontinued Operations — Net:
Basic and Diluted $ — $ — $ — $ —

~~SJG~~0SJG RELATED-PARTY TRANSACTIONS - There have been no significant changes in the nature of SJG’s related-party transactions since December 31, ~~2019.~~2020. See Note 3 to the Financial Statements in Item 8 of SJI's and SJG’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for a ~~detailed~~ description of ~~the~~ related parties and ~~their~~ associated transactions.

A summary of related-party transactions involving SJG, excluding pass-through items, included in SJG's Operating Revenues were as follows (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Operating Revenues/Affiliates:	Operating Revenues/Affiliates:									Operating Revenues/Affiliates:
SJRG	SJRG	$	568	$	1,142	$	1,597	$	2,426	SJRG	$	6,329	$	1,029
Marina	Marina	—		105		60		221		Marina	0		60
Other	Other	20		20		40		40		Other	21		20
Total Operating Revenue/Affiliates	Total Operating Revenue/Affiliates	$	588	$	1,267	$	1,697	$	2,687	Total Operating Revenue/Affiliates	$	6,350	$	1,109

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Related-party transactions involving SJG, excluding pass-through items, included in SJG's Cost of Sales and Operating Expenses were as follows (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Costs of Sales/Affiliates (Excluding depreciation and amortization)	Costs of Sales/Affiliates (Excluding depreciation and amortization)									Costs of Sales/Affiliates (Excluding depreciation and amortization)
SJRG*		$	1,470	$	3,335	$	1,596	$	6,582
SJRG										SJRG	$	1,367	$	126

Operations Expense/Affiliates:	Operations Expense/Affiliates:									Operations Expense/Affiliates:
SJI		$	5,944	$	5,694	$	11,554	$	10,420
SJI (parent company only)										SJI (parent company only)	$	5,564	$	5,610
SJIU	SJIU	917		578		1,873		578		SJIU	960		955
Millennium	Millennium	821		789		1,647		1,552		Millennium	866		827
Other	Other	439		426		882		961		Other	73		443
Total Operations Expense/Affiliates	Total Operations Expense/Affiliates	$	8,121	$	7,487	$	15,956	$	13,511	Total Operations Expense/Affiliates	$	7,463	$	7,835

*These costs are included in either SJG's Cost

Table of Sales on the condensed statements of income (loss). As discussed in Note 1 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2019, revenues and expenses related to the energy trading activities of the wholesale energy operations at SJRG are presented on a net basis in Operating Revenues – Nonutility on the condensed consolidated income statement.Contents

4. COMMON STOCK:

The following shares were issued and outstanding for SJI:


			~~2020~~2021
Beginning Balance, January 1			~~92,394,155~~100,591,940
New Issuances During the Period:
~~ATM~~Public Equity Offering			~~8,122,283~~1,899,859
Stock-Based Compensation Plan			~~69,612~~80,051
Ending Balance, ~~June 30~~March 31			~~100,586,050~~102,571,850

The par value ($1.25 per share) of stock issued was recorded in Common Stock and the net excess over par value was recorded in Premium on Common ~~Stock, which shows an increase on the condensed consolidated balance sheets from December 31, 2019 to June 30, 2020 primarily due to the issuance of shares under the ATM equity offering.~~Stock.

There were 2,339,139 shares of SJG's common stock (par value $2.50 per share) outstanding as of ~~June 30, 2020.~~March 31, 2021. SJG did not issue any new shares during the period. SJIU owns all of the outstanding common stock of SJG.

COMMON STOCK PUBLIC OFFERING -

~~ATM EQUITY OFFERING - In April 2020,~~•On March 22, 2021, SJI ~~entered into an ATM Equity Offering Sales Agreement (the "Sales Agreement") to sell, from time to time,~~offered 10,250,000 shares of ~~the Company’s~~its common stock, par value $1.25 per share, ~~having an aggregate sale~~at a public offering price ~~up to $200.0 million, through an “at-the-market” equity offering program. Pursuant to~~of $22.25 per share. Of the ~~Sales Agreement, the~~offered shares, 362,359 shares were issued at closing. The remaining 9,887,641 shares of common stock ~~were~~("Forward Shares") are to be ~~offered and~~ sold ~~through any~~by Bank of America, N.A., as forward seller, pursuant to a forward sale agreement. The Company received no proceeds from the sale of the ~~named sales agents~~Forward Shares in ~~negotiated transactions~~the first quarter of 2021. SJI has an option to settle the forward sale agreement by delivering newly issued shares of SJI common stock and receive proceeds, subject to certain adjustments, from the sale of those shares, assuming one or ~~transactions that are deemed~~more future physical settlements of the forward sale agreement, no later than March 2022. SJI may also choose to settle the forward sale contract with a cash payment, or multiple cash payments, no later than March 2022. In the event SJI elects to settle all or a portion of the forward sale contract with a cash payment, no additional shares of SJI common stock would be ~~“at-the-market” offerings. In June 2020, 8,122,283 shares were sold pursuant to~~issued under the ~~Sales Agreement at an average market price of approximately $24.62~~forward sale contract for ~~total net proceeds of $198.0 million after deducting commissions and other general & administrative expenses. These sales exhausted~~ the ~~shares~~portions that were ~~available for sale under the Sales Agreement.~~ ~~The Company intends to use the net proceeds from~~ ~~this offering for general corporate purposes.~~cash settled.

•On March 25, 2021, 1,537,500 shares pursuant to the underwriters’ option as part of the underwriting agreement for the above offering of shares were issued at the same public offering price of $22.25.

•The issuance of a total 1,899,859 shares in March 2021 resulted in gross proceeds of $42.3 million, with net proceeds, after deducting underwriting discounts and commissions as well as legal fees, totaling $40.6 million.

EQUITY UNITS PUBLIC OFFERING -

•On March 22, 2021, SJI issued and sold 6,000,000 Equity Units, initially consisting of Corporate Units ("2021 Corporate Units"). Each 2021 Corporate Unit has a stated amount of $50 and is comprised of (a) a purchase contract obligating the holder to purchase from the Company for a price in cash of $50, on the purchase contract settlement date, or April 1, 2024, subject to earlier termination or settlement, a certain number of shares of Common Stock; and (b) a 1/20, or 5%, undivided beneficial ownership interest in $1,000 principal amount of the Company’s 2021 Series B 1.65% Remarketable Junior Subordinated Notes due 2029 (for this section, the “Notes”). In addition to interest payable under the Notes, holders of the 2021 Corporate Units will be entitled to receive quarterly contract adjustment payments at a rate of 7.10% per year on the stated amount of $50 per 2021 Corporate Unit, subject to the Company’s right to defer such contract adjustment payments. No deferral period will extend beyond the purchase contract settlement date. The contract adjustment payments are payable quarterly on January 1, April 1, July 1 and October 1 of each year. The contract adjustment payments will be subordinated to all of the Company's existing and future “Priority Indebtedness” and will be structurally subordinated to all liabilities of our subsidiaries. The present value of the contract adjustment payments due through April 1, 2024 are initially charged to Shareholders’ Equity, with an offsetting credit to Other Current and Noncurrent Liabilities on the condensed consolidated balance sheet. These liabilities are accreted over the life of the purchase contract by interest charges to the condensed consolidated income statement based on a constant rate calculation. Subsequent contract adjustment payments reduce this liability. This

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offering resulted in gross proceeds of approximately $300.0 million, with net proceeds, after deducting underwriting discounts and commissions, of $291.0 million. As of March 31, 2021, the net proceeds, after amortization of the underwriting discounts, are recorded as Long-Term Debt on the condensed consolidated balance sheets.

•On April 1, 2021, the underwriters purchased an additional 700,000 Equity Units as part of their option under the above offering to purchase an additional 900,000 Equity Units. Gross proceeds were approximately $35.0 million, with net proceeds, after deducting underwriting discounts and commissions, of approximately $34.0 million.

CONVERTIBLE UNITS -

•In 2018, SJI issued and sold 5,750,000 Equity Units, initially in the form of Corporate Units ("2018 Corporate Units"), which included 750,000 of 2018 Corporate Units pursuant to the underwriters’ option. Each 2018 Corporate Unit has a stated amount of $50 and is comprised of (a) a purchase contract obligating the holder to purchase from the Company, and for the Company to sell to the holder for a price in cash of $50, on the purchase contract settlement date, or April 15, 2021, subject to earlier termination or settlement, a certain number of shares of common stock; and (b) a 1/20, or 5%, undivided beneficial ownership interest in $1,000 principal amount of SJI’s 2018 Series A 3.70% Remarketable Junior Subordinated Notes due ~~2031.~~2031 (the "Series A Junior Subordinated Notes"). SJI ~~will pay~~pays the holder quarterly contract adjustment payments at a rate of 3.55% per year on the stated amount of $50 per Equity Unit, in respect of each purchase contract, subject to the Company's right to defer these payments. The net proceeds, after amortization of the underwriting discounts, are recorded as Long-Term Debt on the condensed consolidated balance ~~sheets.~~sheets as of March 31, 2021.

•On March 25, 2021, the Company finalized the remarketing of the $287.5 million of Series A Junior Subordinated Notes. The interest rate on the Series A Junior Subordinated Notes has been reset to 5.020% per year, and this reset rate became effective on April 15, 2021 (see below). Interest on the Series A Junior Subordinated Notes will be payable semi-annually on April 15 and October 15, commencing on April 15, 2021, and at maturity.

•On April 1, 2021, the Company announced the settlement rate for the stock purchase contracts that are components of the 2018 Corporate Units. Holders of the 2018 Corporate Units will receive 1.7035 shares of SJI common stock for each stock purchase contract that they hold, with cash to be paid in lieu of any fractional shares. The settlement rate is based upon the original settlement rate of 1.6949 shares, as adjusted for certain corporate events since original issuance. Consequently, on April 15, 2021, each holder of the 2018 Corporate Units on that date, following payment of $50.00 for each unit held, received 1.7035 shares of the Company’s common stock for each such unit. As a result of settlement of the outstanding stock purchase contracts, on April 15, 2021, the Company received approximately $287.5 million in exchange for approximately 9.8 million shares of common stock. Additionally, each 2018 Corporate Unit holder of record on April 1, 2021, received the final quarterly cash distribution of $0.90625 per 2018 Corporate Unit and received any remaining amounts from the treasury portfolio that was purchased in connection with the remarketing described above, as well as any earnings from the reinvestment of that treasury portfolio when it matured.

The convertible units consisted of the following (in thousands):


		June 30, 2020		December 31, 2019			March 31, 2021				December 31, 2020
Principal amount:	Principal amount:					Principal amount:	2021 Series B Remarketable Junior Subordinated Notes due 2029		2018 Series A Remarketable Junior Notes due 2031
Principal (A)	Principal (A)	$	287,500	$	287,500	Principal (A)	$	300,000	$	287,500	$	287,500
Unamortized debt discount and issuance costs (A)	Unamortized debt discount and issuance costs (A)	7,463		7,737		Unamortized debt discount and issuance costs (A)	9,000		7,041		7,181
Net carrying amount	Net carrying amount	$	280,037	$	279,763	Net carrying amount	$	291,000	$	280,459	$	280,319
Carrying amount of the equity component (B)	Carrying amount of the equity component (B)	$	—	$	—	Carrying amount of the equity component (B)	$	0	$	0	$	0

(A) Included in the condensed consolidated balance sheets within Long-Term Debt.

(B) There is ~~currently~~ no equity ~~portion.~~portion as of March 31, 2021.

During ~~both~~ the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized ~~approximately $0.1~~$2.7 million ~~of amortization of debt discount~~ and ~~issuance costs prior to capitalization of interest, and $2.7~~$2.6 million, respectively, of coupon interest expense, all of which was included in Interest Charges on the condensed consolidated statements of ~~income (loss).~~ income.

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During ~~both~~these periods presented, the ~~six months ended June 30, 2020 and 2019, the Company recognized approximately $0.3 million of~~ amortization of debt discount and issuance costs ~~prior to capitalization~~is not material. As of ~~interest, and $5.3 million, of coupon interest expense, all of which was included in Interest Charges on~~March 31, 2021, the ~~condensed consolidated statements of income (loss). The~~ effective interest rate was 2.1% on the 2021 Notes and 4.0%. on the 2018 Notes.

SJI's EPS — SJI's Basic EPS is based on the weighted-average number of common shares outstanding. The incremental shares required for inclusion in the denominator for the diluted EPS calculation were ~~116,527~~1,091,313 and ~~115,798~~111,077 for ~~the six months ended June 30, 2020 and 2019, respectively. For~~ the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, incremental shares of 121,976 and 100,012, respectively, were not included in the denominator for the diluted EPS calculation because they would have an antidilutive effect on EPS.~~respectively. These ~~additional~~ shares relate to SJI's restricted stock as discussed in Note 2, along with the impact of the Forward Shares, Equity Units and Convertible Units discussed above, accounted for under the treasury stock method.

DRP — SJI offers a DRP which allows participating shareholders to purchase shares of SJI common stock by automatic reinvestment of dividends or optional purchases. SJI currently purchases shares on the open market to fund share purchases by DRP participants, and as a result SJI did not raise any equity capital through the DRP in ~~2019 or the~~ first ~~six~~three months of ~~2020. SJI does not intend to issue equity capital via the DRP during the remainder of 2020.~~2021.

~~ADDITIONAL INVESTMENT BY SHAREHOLDER - SJG received a $9.5 million equity infusion~~RETAINED EARNINGS — The Utilities are limited by their regulatory authorities on the amount of cash dividends or other distributions they are able to transfer to their parent, specifically if such dividends or other distributions could impact their capital structure. In addition, SJG's and ETG's First Mortgage Indentures contain restrictions regarding the amount of cash dividends or other distributions that they may pay. As of March 31, 2021, these loan restrictions do not affect the amount that may be distributed from SJI during the three and six months ended June 30, 2020. There was 0 equity infusion during the three and six months ended June 30, 2019. Future equity contributions will occur on an as-needed basis.either SJG's or ETG's retained earnings.

5. FINANCIAL INSTRUMENTS:

RESTRICTED INVESTMENTS — SJI and SJG maintain margin accounts with certain counterparties to support their risk management activities associated with hedging commodities. The balances required to be held in these margin accounts increase as the net value of the outstanding energy-related contracts with the respective counterparties decrease.

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The following table provides SJI's (including SJG) and SJG's balances of Restricted Investments as well as presents a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that total to the amounts shown in the condensed consolidated statements of cash flows (in thousands):


		As of June 30, 2020							As of March 31, 2021
Balance Sheet Line Item	Balance Sheet Line Item	SJI		SJG		Balance Sheet Line Item	SJI		SJG
Cash and Cash Equivalents	Cash and Cash Equivalents	$	7,267	$	2,144	Cash and Cash Equivalents	$	30,386	$	15,984
Restricted Investments	Restricted Investments	11,402		3,448		Restricted Investments	1,482		1,482
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	18,669	$	5,592	Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	31,868	$	17,466


		As of December 31, 2019							As of December 31, 2020
Balance Sheet Line Item	Balance Sheet Line Item	SJI		SJG		Balance Sheet Line Item	SJI		SJG
Cash and Cash Equivalents	Cash and Cash Equivalents	$	6,417	$	2,678	Cash and Cash Equivalents	$	34,045	$	1,598
Restricted Investments	Restricted Investments	21,964		4,073		Restricted Investments	7,786		4,826
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	28,381	$	6,751	Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	41,831	$	6,424

The carrying amounts of the Restricted Investments for both SJI and SJG approximate their fair values at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, which would be included in Level 1 of the fair value hierarchy ~~(see~~(see Note 13).

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ALLOWANCE FOR CREDIT LOSSES - Accounts receivable are recorded ~~net of an~~gross on the condensed consolidated balance sheets with allowance for credit ~~losses.~~losses shown as a separate line item titled Provision for Uncollectibles. A summary of changes in the allowance for credit losses for the three months ended March 31, 2021 is as follows (in thousands):


							Three Months Ended March 31,
		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020			2021		2020
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):					SJI (includes SJG and all other consolidated subsidiaries):
Balance at beginning of period	Balance at beginning of period	$	23,533	$	19,829	Balance at beginning of period	$	30,582	$	19,829
Provision for expected credit losses	Provision for expected credit losses	9,715		14,578		Provision for expected credit losses	2,409		4,863
Regulated assets (a)						Regulated assets (a)	4,134		—
Recoveries of accounts previously written off	Recoveries of accounts previously written off	319		562		Recoveries of accounts previously written off	230		243
Uncollectible accounts written off	Uncollectible accounts written off	(3,157)		(4,559)		Uncollectible accounts written off	(1,500)		(1,402)

Balance at end of period	Balance at end of period	$	30,410	$	30,410	Balance at end of period	35,855		23,533

SJG:	SJG:					SJG:
Balance at beginning of period	Balance at beginning of period	$	14,902	$	14,032	Balance at beginning of period	$	17,359	$	14,032
Provision for expected credit losses	Provision for expected credit losses	1,608		3,472		Provision for expected credit losses	1,760		1,864
Regulated assets (a)						Regulated assets (a)	2,194		—
Recoveries of accounts previously written off	Recoveries of accounts previously written off	159		291		Recoveries of accounts previously written off	127		132
Uncollectible accounts written off	Uncollectible accounts written off	(2,197)		(3,323)		Uncollectible accounts written off	(967)		(1,126)

Balance at end of period	Balance at end of period	$	14,472	$	14,472	Balance at end of period	20,473		14,902

~~As discussed in Note 8, as a result of a July 2, 2020 BPU Order, during the second quarter 2020, ETG and SJG deferred amounts~~(a) Deferral of incremental costs related to the COVID-19 pandemic as ~~regulatory assets. As of June 30, 2020, the amounts recorded within this~~a regulatory asset, related to the allowance for credit losses is approximately $9.0 million and $0.7 million for ETG and SJG, respectively, and are included in the provision for expected losses shown in the tables above.resulting from a July 2, 2020 BPU Order (see Note 8).

NOTES RECEIVABLE-AFFILIATES - The carrying amounts of the Note Receivable-Affiliates balances approximate their fair values at March 31, 2021 and December 31, 2020, which would be included in Level 2 of the fair value hierarchy. See Note 3.3 for information about these balances and Note 13 for information about the fair value hierarchy.

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~~LONG-TERM~~CONTRACT RECEIVABLES - SJG provides financing to customers for the purpose of attracting conversions to natural gas heating systems from competing fuel sources. The terms of these loans call for customers to make monthly payments over periods ranging from five to ten years, with no interest. The carrying amounts of such loans were ~~$3.1~~$2.3 million and ~~$3.7~~$2.5 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The current portion of these receivables is reflected in Accounts Receivable and the non-current portion is reflected in Contract Receivables on the condensed consolidated balance sheets. The carrying amounts noted above are net of unamortized discounts resulting from imputed ~~interest in the~~interest. The amount of ~~$0.4 million~~such discounts and ~~$0.5 million as of June 30, 2020 and December 31, 2019, respectively. The~~the annualized amortization to interest is not material to ~~SJI’s~~SJI's or SJG's ~~condensed~~ consolidated financial statements.

In addition, as part of the ~~EET/EEP programs,~~EET program, SJG provides funding to customers to upgrade equipment for the purpose of promoting energy efficiency. The terms of these loans range from two to ten years. The carrying amounts of such loans were ~~$38.2~~$49.4 million and ~~$33.5~~$46.4 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. On the condensed consolidated balance sheets of SJI and SJG, the current portion of ~~EET/EEP~~EET loans receivable totaled ~~$5.3~~$6.8 million and ~~$4.6~~$6.4 million as of March 31, 2021 and December 31, 2020, respectively, and is reflected in Accounts ~~Receivable as of June 30, 2020 and December 31, 2019, respectively,~~Receivable; and the non-current portion totaled ~~$32.9~~$42.6 million and ~~$28.9~~$40.0 million as of March 31, 2021 and December 31, 2020, respectively, and is reflected in Contract ~~Receivables as of June 30, 2020 and December 31, 2019, respectively.~~ Receivables.

Given the risk of uncollectibility is low due to the oversight and preapproval required by the BPU, no allowance for credit loss has been ~~recognized.~~recognized on the above-mentioned receivables. There have been no material impacts to this risk of uncollectibility as a result of COVID-19.

The carrying amounts of these receivables approximate their fair value at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, which would be included in Level 2 of the fair value hierarchy (see Note 13).

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CREDIT RISK - As of ~~June 30, 2020,~~March 31, 2021, SJI had approximately ~~$10.5~~$6.1 million, or ~~24.1%~~11.1%, of the current and noncurrent Derivatives – Energy Related Assets transacted with ~~2 counterparties. These counterparties are~~1 counterparty. This counterparty is investment-grade rated.

FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE - The fair value of a financial instrument is the market price to sell an asset or transfer a liability at the measurement date. The carrying amounts of SJI's and SJG's financial instruments approximate their fair values at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, except as noted ~~below.~~below (in thousands):

•


	March 31, 2021		December 31, 2020
SJI (includes SJG and all consolidated entities)
Estimated fair values of long-term debt	$	3,302,062	$	3,152,224

Carrying amounts of long-term debt, including current maturities (A)	$	3,206,195	$	2,919,201
Net of:
Unamortized debt issuance costs	$	40,104	$	29,574
Unamortized debt discounts	$	5,202	$	5,224

SJG
Estimated fair values of long-term debt	$	1,121,257	$	1,197,052

Carrying amounts of long-term debt, including current maturities	$	1,066,749	$	1,069,089
Net of:
Unamortized debt issuance costs	$	9,197	$	9,357

(A) SJI Long-Term Debt on the consolidated balance sheet as of both March 31, 2021 and December 31, 2020 includes a $3.1 million finance lease.

For Long-Term Debt (including current maturities), in estimating the fair value, SJI and SJG use the present value of remaining cash flows at the balance sheet date. SJI and SJG based the estimates on interest rates available at the end of each period for debt with similar terms and maturities (Level 2 in the fair value hierarchy, see Note 13).

•~~The estimated fair values of SJI's long-term debt (which includes SJG and all consolidated subsidiaries), including current maturities, as of both June 30, 2020 and December 31, 2019~~, were $2.73 billion. The carrying amounts of SJI's long-term debt, including current maturities, as of June 30, 2020 and December 31, 2019, were $2.68 billion and $2.54 billion, respectively. SJI's carrying amounts as of June 30, 2020 are net of unamortized debt issuance costs of $29.3 million and unamortized debt discounts of $5.3 million. SJI's carrying amounts as of December 31, 2019 are net of unamortized debt issuance costs of $25.5 million and unamortized debt discounts of $5.3 million.

•~~The estimated fair values of SJG's long-term debt, including current maturities, as of June 30, 2020 and December 31, 2019, were~~ ~~$982.9 million~~ and $915.2 million, respectively. The carrying amounts of SJG's long-term debt, including current maturities, as of June 30, 2020 and December 31, 2019, were $962.4 million and $965.1 million, respectively. The carrying amounts as of June 30, 2020 and December 31, 2019 are net of unamortized debt issuance costs of $8.9 million and $6.3 million, respectively.

~~OTHER FINANCIAL INSTRUMENTS - The carrying amounts of SJI's and SJG's other financial instruments approximate their fair values at June 30, 2020 and December 31, 2019.~~

6. SEGMENTS OF BUSINESS:

~~SJI operates in several different~~ASC 280, Segment Reporting, establishes standards for reporting information about operating segments and requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the CODM in deciding how to allocate resources and in assessing performance.

Beginning with the first quarter of 2021, our internal management reporting, specifically around our nonutility businesses, changed primarily due to recent acquisitions and divestitures, and new product lines entered into as a result. These were primarily within the fuel cell, solar, RNG, and retail businesses. Refer to Item 1, along with Note 1 to the Consolidated Financial Statements in Item 8, of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2020 for information about these acquisitions and divestitures.

As a result of these changes in our businesses, the Company realigned its operating segments. The realigned segments reflect the financial information regularly evaluated by the ~~CODM. These~~CODM, which for SJI is the Company's Chief Executive Officer.

The operating segments are as follows:

•SJG utility operations consist primarily of natural gas distribution to residential, commercial and industrial customers in southern New Jersey.

•ETG utility operations consist of natural gas distribution to residential, commercial and industrial customers in northern and central New Jersey.

•ELK utility operations consist of natural gas distribution to residential, commercial and industrial customers in Maryland. ~~As discussed in Note 1, on~~On July 31, 2020, SJI sold ELK to a third-party buyer.

Table of Contents

•Wholesale energy operations include the activities of SJRG and SJEX.

~~Table of Contents~~

•Retail ~~electric~~services operations atincludes the activities of SJE, ~~consist of electricity acquisition~~SJESP and ~~transportation to commercial, industrial and residential customers.~~SJEI, as well as our equity interest in Millennium.

•~~On-site energy production~~Renewables consists ~~of MTF~~of:

◦The Catamaran joint venture, which owns Annadale.

◦Solar-generation sites located in New Jersey, and ~~ACB, which as discussed in Note 1, were sold on February 18, 2020. This segment also includes other energy-related projects, including~~ 3 legacy solar projects, 1 of which was sold during the ~~three months ended March 31, 2020 as discussed in Note 1. Also included in this segment are the~~first quarter of 2020.

◦The activities of ACLE, BCLE, SCLE and SXLE. Operations at BCLE, SCLE, and SXLE ceased during the second quarter of ~~2020 as discussed~~2020.

◦MTF and ACB, which were sold in ~~Note 1. As~~the first quarter of ~~June 30, 2020, on-site energy production also includes newly acquired entities which own and operate solar-generation sites located in New Jersey. See Note 17.~~2020.

•~~Appliance service operations~~Decarbonization consists of

◦SJI Renewables Energy Ventures, LLC, which includes ~~SJESP,~~our equity interest in REV, which ~~receives commissions~~is included in Equity in Earnings of Affiliated Companies on ~~service contracts~~the condensed consolidated statements of income.

◦SJI RNG Devco, LLC, which includes the renewable natural gas development rights in certain dairy farms; there are no operating results from ~~a third party.~~this entity at this time.

•Midstream ~~was formed to invest~~invests in infrastructure and other midstream projects, including ~~a current project to build a natural gas pipeline~~an investment in ~~Pennsylvania and New Jersey.~~PennEast.

•Corporate & Services segment includes costs related to ~~the Acquisition, along with~~financing, acquisitions and divestitures, and other unallocated costs. ~~Also included in this segment are the results of SJEI.~~

•Intersegment represents intercompany transactions among the above SJI consolidated entities.

SJI groups its utility businesses under its wholly-owned subsidiary SJIU. This group consists of gas utility operations of SJG and ETG and, until its sale, ELK. SJI groups its nonutility operations into separate ~~categories:~~categories: Energy ~~Group,~~Management; Energy ~~Services, Midstream~~Production; Midstream; and Corporate & Services. Energy ~~Group~~Management includes wholesale energy and retail ~~electric operations.~~ services.Energy ~~Services includes on-site energy production~~Production includes renewables and ~~appliance service operations.~~decarbonization. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Information about SJI’s operations in different reportable operating segments is presented below (in thousands). ~~The results for AEP are included in~~All prior periods were revised to conform to the ~~Corporate & Services~~new segment from the acquired date of August 31, 2019. Further, the results and balances for On-Site Energy Production are impacted by the sales of solar assets and the sale of MTF and ACB (see Note 1). The identifiable assets balance for On-Site Energy Production as of June 30, 2020 is also impacted by the newly acquired entities, which closed on June 30, 2020 (see Note 17).alignment noted above.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Operating Revenues:	Operating Revenues:									Operating Revenues:
SJI Utilities:	SJI Utilities:									SJI Utilities:
SJG Utility Operations	SJG Utility Operations	$	87,182	$	62,268	$	327,876	$	334,466	SJG Utility Operations	$	251,399	$	240,694
ETG Utility Operations	ETG Utility Operations	57,843		44,854		202,000		185,028		ETG Utility Operations	157,545		144,157
ELK Utility Operations	ELK Utility Operations	1,389		944		4,507		4,318		ELK Utility Operations	0		3,118
Subtotal SJI Utilities	Subtotal SJI Utilities	146,414		108,066		534,383		523,812		Subtotal SJI Utilities	408,944		387,969
Energy Group:
Energy Management:										Energy Management:
Wholesale Energy Operations	Wholesale Energy Operations	101,526		126,483		229,970		316,490		Wholesale Energy Operations	261,910		128,444
Retail Services										Retail Services	3,896		13,083

Retail Electric Operations		9,957		20,531		22,182		43,222
Subtotal Energy Group		111,483		147,014		252,152		359,712
Energy Services:
On-Site Energy Production		2,154		14,788		9,142		26,118
Appliance Service Operations		505		484		994		1,015
Subtotal Energy Services		2,659		15,272		10,136		27,133
Subtotal Energy Management										Subtotal Energy Management	265,806		141,527
Energy Production:										Energy Production:
Renewables										Renewables	6,423		6,988

Subtotal Energy Production										Subtotal Energy Production	6,423		6,988
Corporate and Services	Corporate and Services	12,918		11,815		26,628		21,186		Corporate and Services	13,793		13,341
Subtotal	Subtotal	273,474		282,167		823,299		931,843		Subtotal	694,966		549,825
Intersegment Sales	Intersegment Sales	(13,510)		(15,233)		(29,223)		(27,611)		Intersegment Sales	(20,666)		(15,713)
Total Operating Revenues	Total Operating Revenues	$	259,964	$	266,934	$	794,076	$	904,232	Total Operating Revenues	$	674,300	$	534,112

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	Three Months Ended March 31,
	2021		2020
Operating Income:
SJI Utilities:
SJG Utility Operations	$	118,842	$	104,645
ETG Utility Operations	58,020		54,062
ELK Utility Operations	0		535
Subtotal SJI Utilities	176,862		159,242
Energy Management:
Wholesale Energy Operations	17,308		7,412

Retail Services	(220)		(768)
Subtotal Energy Management	17,088		6,644
Energy Production:
Renewables	2,700		(296)


Subtotal Energy Production	2,700		(296)
Corporate and Services	178		172
Total Operating Income	$	196,828	$	165,762

Depreciation and Amortization:
SJI Utilities:
SJG Utility Operations	$	29,484	$	25,059
ETG Utility Operations	22,630		9,451
ELK Utility Operations	0		133
Subtotal SJI Utilities	52,114		34,643
Energy Management:
Wholesale Energy Operations	20		16
Retail Services	118		0

Subtotal Energy Management	138		16
Energy Production:
Renewables	1,198		3


Subtotal Energy Production	1,198		3
Corporate and Services	990		1,240
Total Depreciation and Amortization	$	54,440	$	35,902

Interest Charges:
SJI Utilities:
SJG Utility Operations	$	9,725	$	7,542
ETG Utility Operations	8,693		7,145
ELK Utility Operations	0		12
Subtotal SJI Utilities	18,418		14,699





Energy Production:
Renewables	1,208		1,602
Decarbonization	294		0
Subtotal Energy Production:	1,502		1,602
Midstream	671		580
Corporate and Services	12,843		17,887
Subtotal	33,434		34,768

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Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Operating Income:
SJI Utilities:
     SJG Utility Operations $ 9,732 $ 10,215 $ 114,377 $ 108,560
     ETG Utility Operations 6,375 2,051 60,437 46,200
     ELK Utility Operations 212 (32) 747 598
          Subtotal SJI Utilities 16,319 12,234 175,561 155,358
Energy Group:
     Wholesale Energy Operations 6,092 (2,386) 13,504 (4,892)
Retail Electric Operations (449) (2,313) (1,670) (3,969)
     Subtotal Energy Group 5,643 (4,699) 11,834 (8,861)
Energy Services:
On-Site Energy Production (2,016) 1,343 (2,312) 1,461
Appliance Service Operations 457 421 896 1,016
  Subtotal Energy Services (1,559) 1,764 (1,416) 2,477
Corporate and Services (212) (433) (26) (5,555)
Total Operating Income $ 20,191 $ 8,866 $ 185,953 $ 143,419
Depreciation and Amortization:
SJI Utilities:
     SJG Utility Operations $ 25,395 $ 23,083 $ 50,454 $ 45,785
     ETG Utility Operations 10,528 6,813 19,979 13,471
     ELK Utility Operations 169 113 302 225
          Subtotal SJI Utilities 36,092 30,009 70,735 59,481
Energy Group:
     Wholesale Energy Operations 14 25 30 48
     Subtotal Energy Group 14 25 30 48
Energy Services:
On-Site Energy Production 3 1,256 6 2,508
  Subtotal Energy Services 3 1,256 6 2,508
Corporate and Services 1,197 1,754 2,437 2,998
Total Depreciation and Amortization $ 37,306 $ 33,044 $ 73,208 $ 65,035
Interest Charges:
SJI Utilities:
       SJG Utility Operations $ 8,019 $ 7,896 $ 15,561 $ 15,744
       ETG Utility Operations 7,778 6,620 14,923 12,941
       ELK Utility Operations 7 5 19 11
            Subtotal SJI Utilities 15,804 14,521 30,503 28,696
On-Site Energy Production 1,095 2,138 2,697 4,423
Midstream 580 555 1,160 1,099
Corporate and Services 12,955 14,659 30,842 30,063
Subtotal 30,434 31,873 65,202 64,281
Intersegment Borrowings (1,845) (3,439) (4,077) (7,194)
Total Interest Charges $ 28,589 $ 28,434 $ 61,125 $ 57,087


Intersegment Borrowings	(1,975)		(2,232)
Total Interest Charges	$	31,459	$	32,536


	Three Months Ended March 31,
	2021		2020
Income Taxes:
SJI Utilities:
SJG Utility Operations	$	27,114	$	25,231
ETG Utility Operations	12,153		10,621
ELK Utility Operations	0		136
Subtotal SJI Utilities	39,267		35,988
Energy Management:
Wholesale Energy Operations	4,912		2,006
Retail Services	172		(29)

Subtotal Energy Management	5,084		1,977
Energy Production:
Renewables	464		1,049
Decarbonization	197		0

Subtotal Energy Production	661		1,049
Midstream	(61)		(29)
Corporate and Services	(3,182)		(5,615)
Total Income Taxes	$	41,769	$	33,370

Property Additions:
SJI Utilities:
SJG Utility Operations	$	53,409	$	57,970
ETG Utility Operations	41,130		49,014
ELK Utility Operations	0		651
Subtotal SJI Utilities	94,539		107,635




Energy Production:
Renewables	773		53
Decarbonization	836		0
Subtotal Energy Production	1,609		53
Midstream	4		45
Corporate and Services	744		661
Total Property Additions	$	96,896	$	108,394

Table of Contents

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Income Taxes:
SJI Utilities:
     SJG Utility Operations $ 1,219 $ 671 $ 26,450 $ 24,368
     ETG Utility Operations (277) (809) 10,344 6,093
     ELK Utility Operations 54 (9) 190 154
           Subtotal SJI Utilities 996 (147) 36,984 30,615
Energy Group:
     Wholesale Energy Operations 1,719 (481) 3,725 (958)
Retail Electric Operations (42) (569) (245) (818)
     Subtotal Energy Group 1,677 (1,050) 3,480 (1,776)
Energy Services:
On-Site Energy Production (755) 121 294 (357)
Appliance Service Operations 178 136 345 303
  Subtotal Energy Services (577) 257 639 (54)
Midstream (87) (33) (116) (65)
Corporate and Services (2,187) (3,673) (7,795) (8,417)
Total Income Taxes $ (178) $ (4,646) $ 33,192 $ 20,303
Property Additions:
SJI Utilities:
     SJG Utility Operations $ 49,989 $ 67,257 $ 107,959 $ 122,562
     ETG Utility Operations 55,112 53,938 104,126 91,962
     ELK Utility Operations 208 983 859 1,628
          Subtotal SJI Utilities 105,309 122,178 212,944 216,152
Energy Services:
On-Site Energy Production 2,832 141 2,885 164
  Subtotal Energy Services 2,832 141 2,885 164
Midstream 41 7 86 19
Corporate and Services 700 1 1,361 586
Total Property Additions $ 108,882 $ 122,327 $ 217,276 $ 216,921


	March 31, 2021		December 31, 2020
Identifiable Assets:
SJI Utilities:
SJG Utility Operations	$	3,554,139	$	3,522,265
ETG Utility Operations	2,583,939		2,561,067

Subtotal SJI Utilities	6,138,078		6,083,332
Energy Management:
Wholesale Energy Operations	174,736		195,882

Retail Services	27,775		29,687
Subtotal Energy Management	202,511		225,569
Energy Production:
Renewables	144,036		153,018
Decarbonization	42,136		40,482

Subtotal Energy Production	186,172		193,500
Midstream	94,191		92,208
Discontinued Operations	1,756		1,775
Corporate and Services	281,016		318,095
Intersegment Assets	(189,216)		(225,331)
Total Identifiable Assets	$	6,714,508	$	6,689,148

~~Table of Contents~~

June 30, 2020 December 31, 2019
Identifiable Assets:
SJI Utilities:
     SJG Utility Operations $ 3,347,900 $ 3,348,555
     ETG Utility Operations 2,451,923 2,458,846
     ELK Utility Operations 21,137 21,723
          Subtotal SJI Utilities 5,820,960 5,829,124
Energy Group:
     Wholesale Energy Operations 148,869 195,576
Retail Electric Operations 23,545 30,351
     Subtotal Energy Group 172,414 225,927
Energy Services:
On-Site Energy Production 48,924 154,021
Appliance Service Operations 61 —
Subtotal Energy Services 48,985 154,021
Midstream 88,078 83,517
Discontinued Operations 1,737 1,766
Corporate and Services 182,348 403,170
Intersegment Assets (97,568) (332,185)
Total Identifiable Assets $ 6,216,954 $ 6,365,340

7. RATES AND REGULATORY ACTIONS:

SJG and ETG are subject to the rules and regulations of the BPU. ~~ELK is subject to the rules and regulations of the MPSC.~~

Except as described below, there have been no ~~other~~ significant regulatory actions or changes to the Utilities' rate ~~structure~~structures since December 31, ~~2019.~~2020. See Note 10 to the Consolidated Financial Statements in Item 8 of SJI's and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

SJG:

~~Rate Case -~~ In January 2021, the BPU approved SJG’s request from its June 2020 filing for an increase in its EET rate. The approval reflected a $5.9 million increase in revenues.

In March ~~2020, SJG filed a petition with~~2021, the BPU ~~requesting~~approved and made final the credit rate proposed in SJG’s September 2020 filing associated with Tax Reform, which was already in effect on a ~~base~~provisional basis. It is anticipated that the approved rate will result in SJG returning approximately $14.9 million in excess deferred income tax to its ratepayers.

In April 2021, the BPU approved the stipulation resolving SJG's July 2020 Compliance Filing for its SBC (this rider to SJG's tariff adjusts SJG's rates related to RAC, CLEP & USF). All rate changes were approved as requested, and the stipulated rates reflect a $5.5 million increase in revenues. The approved stipulation also contains authority to defer costs related to Natural Resource Defense claims, plus carrying costs.

Also, in April 2021, the BPU approved the stipulation for expansion of SJG's EEP program for three years, effective July 1, 2021, authorizing a total budget of $133.3 million which would initially increase annual revenue increase to recognize the infrastructure investments made to maintain the safety and reliability of its natural gas system since the approval of its previous base rate case proceeding in October 2017. In May 2020, SJG filed to request a base revenue increase of $75.7 million, reflecting an overall rate of return of 7.4%, based on an update to long-term debt costs, a return on equity of 10.4% and common equity component of 54.2%. This matter is currently pending with the BPU.by $5.4 million.

In ~~the first quarter of 2020, the final rates were approved by~~May 2021, the BPU approved the stipulation to resolve SJG's 2020-2021 BGSS filing, including recovery of $22.9 million of costs related to a previous pricing dispute on ~~SJG's 2019-2020 annual BGSS, CIP and SBC/TIC filings.~~ ~~All were approved as requested.~~ The BGSS and CIP approvals do not impact SJG's earnings. They represent changes in the cash requirements of SJG corresponding to cost changes and/or previous over/under recoveries from ratepayers associated with each respective mechanism.a long-term gas supply contract (see Note 8).

In April 2020, SJG submitted its annual filing, pursuant to the October 2016 BPU approval of the AIRP II, seeking a base rate adjustment to increase annual revenues by approximately $6.5 million to reflect the roll-in of approximately $59.5 million of AIRP II investments placed in service during July 1, 2019 through June 30, 2020.~~The matter is currently pending BPU approval.~~

In April 2020, SJG submitted its annual filing, pursuant to the May 2018 BPU approval of the SHARP II, seeking a base rate adjustment to increase annual revenues by approximately $3.8 million to reflect the roll-in of approximately $34.2 million of SHARP II investments placed in service during July 1, 2019 through June 30, 2020.~~The matter is currently pending BPU approval.~~

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In May 2020, the BPU issued an Order resolving SJG’s 2019 Compliance Filing and 2019 Tax Act Rider petition, with a revised Rider H credit rate effective June 1, 2020. The terms of settlement include the following:

•~~The “Unprotected” EDIT balance of approximately $44.7 million will be refunded to customers over a 5 year period through the approved rider;~~

•The net “Protected” EDIT regulatory liability of $149.4 million (regulatory liability of $181.0 million partially offset by a regulatory asset of $31.6 million) will be refunded to customers through a proposed base rate adjustment in SJG’s next base rate case.

In June 2020, SJG submitted its annual Tax Act Rider filing, requesting a rate adjustment to refund approximately $14.9 million related to SJG’s excess deferred income taxes, resulting from the change in the Federal corporate tax rate from 35% to 21% associated with Tax Reform. The matter is currently pending BPU approval.

In June 2020, SJG submitted its annual 2020-2021 BGSS and CIP filings, requesting a $39.2 million decrease in gas costs recoveries related to its BGSS and a $27.4 million increase in revenue related to its CIP, resulting in a net revenue decrease of $11.8 million. In its annual BGSS filing, SJG is seeking recovery of gas costs related to a previous pricing dispute with a third party supplier on two long-term gas supply contracts, with recovery occurring over a two-year period (see Note 8). In addition, the requested decrease in gas costs recoveries includes the return of the refund received from a third party gas supplier (see Note 1). These matters are currently pending BPU approval. Additionally, SJG issued a one-time BGSS bill credit in May 2020 of approximately $0.8 million, plus interest, sales tax and public utility assessments.

In June 2020, SJG filed its annual EET rate adjustment petition, requesting a $5.9 million increase in revenues to continue recovering the costs of, and the allowed return on, investments associated with its EEPs. The matter is currently pending BPU approval.

In June 2020, SJG filed its annual USF petition, along with the State’s other electric and gas utilities. The proposed revenue decrease for SJG is approximately $0.3 million. The matter is currently pending BPU approval.

ETG:

In the first quarter of ~~2020, the~~2021, final rates were approved by the BPU for ETG's 2020-2021 WNC and CEP filings, effective February 27, 2021, which were already in effect on ~~ETG's 2019-2020 annual BGSS,~~a provisional basis. The BPU also approved the requested RAC ~~EEP, WNC, CEP and OSMC filings,~~rate reflecting a $3.2 million decrease in revenues related to the recovery of costs of remediation, effective April 1, 2020. All were approved as requested with the exception of RAC (a final rate reflecting a $6.0 million increase in revenues compared to a request of $6.1 million) and EEP (a final rate reflecting a $0.9 million increase in revenues compared to a request of $1.0 million).2021.

In ~~February 2020, ETG entered into a Stipulation with~~April 2021, the BPU ~~and~~approved the ~~New Jersey Division of Rate Counsel extending~~stipulation for ETG's new EEP program to expand its ~~EEP through June 2020 under the previously approved budget and from~~EEPs for three years effective July ~~2020 through December~~1, 2021 atauthorizing a total budget of ~~approximately $4.2 million. The BPU issued an Order in February 2020 approving the Stipulation.~~

~~In April 2020, ETG submitted its annual filing, pursuant to the June 2019 BPU approval of the IIP, seeking a rider rate to~~$83.4 million which would initially increase annual revenues by ~~approximately $6.5 million~~$2.8 million. This new EEP program will replace the one currently in effect. In May 2021, the BPU also approved the stipulation to ~~reflect~~establish a CIP similar to SJG's CIP, which eliminates the ~~roll-in of approximately $60.0 million of IIP investments placed in service during~~link between usage and margin and includes a weather-related component. The CIP will become effective July 1, ~~2019 through June 30, 2020.The matter is currently pending BPU approval.~~

~~In June 2020, ETG submitted its annual BGSS filing, requesting a $15.5 million decrease in gas cost recoveries. with an effective date of October 1, 2020.The matter is currently pending BPU approval.~~

In June 2020, ETG along with the other New Jersey gas utilities filed jointly for a statewide USF rate decrease and a statewide Lifeline rate increase with effective dates of October 1, 2020 resulting in a reduction in the combined rates.~~The proposed revenue decrease for ETG is approximately $0.3 million. The matter is currently pending BPU approval.~~

~~ELK:~~

As discussed in Note 1, in December 2019, the Company announced it had entered into an agreement to sell ELK to a third-party buyer. This transaction was approved by the MPSC on June 29, 2020. This transaction closed on July 31, 2020 (see Note 20).

~~Table of Contents~~

2021.

8. REGULATORY ASSETS AND REGULATORY LIABILITIES:

Except as described below, there have been no significant changes to the nature or balances of the Utilities' regulatory assets and liabilities since December 31, ~~2019,~~2020, which are described in Note 11 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020.

The Utilities' Regulatory Assets as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consisted of the following items (in thousands):


		June 30, 2020															March 31, 2021
		SJG		ETG		ELK		Total SJI			SJG		ETG		Total SJI
Environmental Remediation Costs:	Environmental Remediation Costs:									Environmental Remediation Costs:
Expended - Net	Expended - Net	$	159,619	$	10,211	$	—	$	169,830	Expended - Net	$	149,979	$	6,034	$	156,013
Liability for Future Expenditures	Liability for Future Expenditures	108,979		90,603		—		199,582		Liability for Future Expenditures	98,579		88,705		187,284
Insurance Recovery Receivables	Insurance Recovery Receivables	—		(13,615)		—		(13,615)		Insurance Recovery Receivables	0		(6,807)		(6,807)
Deferred ARO Costs	Deferred ARO Costs	39,335		14,360		—		53,695		Deferred ARO Costs	43,704		27,594		71,298
Deferred Pension Costs - Unrecognized Prior Service Cost	Deferred Pension Costs - Unrecognized Prior Service Cost	—		35,751		—		35,751		Deferred Pension Costs - Unrecognized Prior Service Cost	0		33,316		33,316
Deferred Pension and Other Postretirement Benefit Costs	Deferred Pension and Other Postretirement Benefit Costs	72,010		1,825		—		73,835		Deferred Pension and Other Postretirement Benefit Costs	77,426		8,466		85,892
Deferred Gas Costs - Net	Deferred Gas Costs - Net	17,732		—		84		17,816		Deferred Gas Costs - Net	19,198		0		19,198
CIP Receivable	CIP Receivable	21,638		—		—		21,638		CIP Receivable	10,028		0		10,028
SBC Receivable		1,660		—		—		1,660
SBC Receivable (excluding RAC)										SBC Receivable (excluding RAC)	4,771		0		4,771
Deferred Interest Rate Contracts	Deferred Interest Rate Contracts	11,407		—		—		11,407		Deferred Interest Rate Contracts	7,441		0		7,441
EET		13,615		—		—		13,615
EET/EEP										EET/EEP	16,848		2,909		19,757
Pipeline Supplier Service Charges	Pipeline Supplier Service Charges	477		—		—		477		Pipeline Supplier Service Charges	411		0		411
Pipeline Integrity Cost	Pipeline Integrity Cost	5,959		—		—		5,959		Pipeline Integrity Cost	5,981		0		5,981
AFUDC - Equity Related Deferrals	AFUDC - Equity Related Deferrals	11,204		—		—		11,204		AFUDC - Equity Related Deferrals	11,883		0		11,883
WNC	WNC	—		5,535		154		5,689		WNC	0		6,120		6,120
Other Regulatory Assets	Other Regulatory Assets	21,719		18,507		—		40,226		Other Regulatory Assets	27,153		10,971		38,124

Total Regulatory Assets	Total Regulatory Assets	$	485,354	$	163,177	$	238	$	648,769	Total Regulatory Assets	$	473,402	$	177,308	$	650,710

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		December 31, 2019															December 31, 2020
		SJG		ETG		ELK		Total SJI			SJG		ETG		Total SJI
Environmental Remediation Costs:	Environmental Remediation Costs:									Environmental Remediation Costs:
Expended - Net	Expended - Net	$	156,279	$	16,955	$	—	$	173,234	Expended - Net	$	157,340	$	5,196	$	162,536
Liability for Future Expenditures	Liability for Future Expenditures	131,262		101,083		—		232,345		Liability for Future Expenditures	101,243		91,837		193,080
Insurance Recovery Receivables	Insurance Recovery Receivables	—		(20,423)		—		(20,423)		Insurance Recovery Receivables	0		(6,807)		(6,807)
Deferred ARO Costs	Deferred ARO Costs	36,515		18,108		—		54,623		Deferred ARO Costs	42,365		25,453		67,818
Deferred Pension Costs - Unrecognized Prior Service Cost	Deferred Pension Costs - Unrecognized Prior Service Cost	—		37,378		—		37,378		Deferred Pension Costs - Unrecognized Prior Service Cost	0		33,898		33,898
Deferred Pension and Other Postretirement Benefit Costs	Deferred Pension and Other Postretirement Benefit Costs	72,010		1,825		—		73,835		Deferred Pension and Other Postretirement Benefit Costs	77,426		8,466		85,892
Deferred Gas Costs - Net	Deferred Gas Costs - Net	49,469		5,301		293		55,063		Deferred Gas Costs - Net	19,178		0		19,178

SBC Receivable		1,478		—		—		1,478
CIP Receivable										CIP Receivable	21,013		0		21,013
SBC Receivable (excluding RAC)										SBC Receivable (excluding RAC)	3,453		0		3,453
Deferred Interest Rate Contracts	Deferred Interest Rate Contracts	7,856		—		—		7,856		Deferred Interest Rate Contracts	9,938		0		9,938
EET		12,877		—		—		12,877
EET/EEP										EET/EEP	18,725		3,062		21,787
Pipeline Supplier Service Charges	Pipeline Supplier Service Charges	525		—		—		525		Pipeline Supplier Service Charges	434		0		434
Pipeline Integrity Cost	Pipeline Integrity Cost	6,516		—		—		6,516		Pipeline Integrity Cost	6,091		0		6,091
AFUDC - Equity Related Deferrals	AFUDC - Equity Related Deferrals	10,712		—		—		10,712		AFUDC - Equity Related Deferrals	11,822		0		11,822
WNC	WNC	—		—		231		231		WNC	0		7,444		7,444
Other Regulatory Assets	Other Regulatory Assets	10,678		9,004		—		19,682		Other Regulatory Assets	26,056		10,359		36,415

Total Regulatory Assets	Total Regulatory Assets	$	496,177	$	169,231	$	524	$	665,932	Total Regulatory Assets	$	495,084	$	178,908	$	673,992

Except where noted below, all regulatory assets are or are expected to be recovered through utility rate charges, as detailed in the following discussion. The Utilities are currently permitted to recover interest on Environmental Remediation Costs, SBC Receivable, EET and Pipeline Integrity Costs, while the other assets are being recovered without a return on investment.

ENVIRONMENTAL REMEDIATION COSTS - SJG and ETG have regulatory assets associated with environmental costs related to the cleanup of environmental ~~sites. SJG has 12~~ sites ~~where SJG or its predecessors previously operated gas manufacturing plants, while ETG is subject to environmental remediation liabilities associated with 5 former manufactured gas plant sites~~as discussed in ~~New Jersey. "Environmental Remediation Cost: Expended - Net" represents what was actually spent to clean up~~Note 15 of SJI's and SJG's Annual Report on Form 10-K for the ~~sites, less recoveries through the RAC and insurance carriers. These costs meet the deferral requirements of ASC 980, as the~~year ended December 31, 2020. The BPU allows SJG and ETG to recover such expenditures through the RAC. "Environmental Remediation Cost: Liability for Future Expenditures" relates to estimated future expenditures required to complete the remediation of these sites. SJG and ETG recorded this estimated amount as a regulatory asset with the corresponding current and noncurrent liabilities on the condensed consolidated balance sheets under the captions "Current Liabilities" (SJI and SJG), "Deferred Credits and Other Noncurrent Liabilities" (SJI) and "Regulatory and Other Noncurrent Liabilities" (SJG). The BPU allows SJG to recover the deferred costs not recovered from insurance carriers through their RAC mechanisms over ~~seven-year~~seven-year periods after ~~they~~the costs are incurred. Environmental remediation costs at ETG are recoverable from customers through the RAC approved by the BPU. "Insurance Recovery Receivables" represents the balance of an insurance settlement executed in the fourth quarter of 2019 with a third party. This settlement, which is expected to be received in installments through the end of 2021, will be returned to ETG's customers through the RAC. Of the original total of $20.4 million, $6.8 million was received by ETG in 2020.

DEFERRED GAS COSTS - NET - Over/under collections of gas costs are monitored through SJG's and ETG's BGSS clause. Net under-collected gas costs are classified as a regulatory asset and net over-collected gas costs are classified as a regulatory liability. Derivative contracts used to hedge natural gas purchases are also included in the BGSS, subject to BPU approval (see Note 12). SJG's balance as of both ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019 also~~2020 includes $22.9 million of costs related to a previous pricing dispute on a long-term gas supply contract. ~~We believe that the~~The amount paid by SJG to the third party supplier to settle the pricing dispute reflects a gas cost that ultimately will be recovered from SJG's customers through adjusted rates through the BGSS ~~clause. The BGSS regulatory assets of SJI and SJG decreased from December 31, 2019 to June 30, 2020, primarily due to recoveries from customers exceeding~~clause, as approved by the ~~actual gas commodity costs, changes~~BPU in ~~valuations of hedged natural gas positions from prior periods and refunds from a third party gas supplier~~May 2021 (see Note 1)7).

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~~DEFERRED ARO COSTS - The Utilities record AROs primarily related to the legal obligation to cut and cap~~ ETG's deferred gas distribution pipelines when taking those pipelines out of service. Deferred ARO costs represent the period to period passage of time (accretion) and the revision to cash flows originally estimated to settle the retirement obligation. Corresponding changescosts-net are ~~made to the ARO liability, thus having no impact on earnings.~~over-recovered at March 31, 2021, resulting in a regulatory liability.

CIP RECEIVABLE - The CIP tracking mechanism at SJG adjusts earnings when the actual usage per customer experienced during the period varies from an established baseline usage per customer. Actual usage per customer was ~~less~~more than the established baseline during the first ~~six~~three months of ~~2020,~~2021, resulting in a reduction of the regulatory asset at ~~June 30, 2020~~March 31, 2021 as compared to ~~a regulatory liability at~~ December 31, ~~2019.~~2020. This is primarily the result of ~~warmer~~colder than normal weather experienced in the ~~region during the winter months.~~region.

WNC - The tariffs for ETG include a weather normalization clause that reduces customer bills when weather is colder than normal and increases customer bills when weather is warmer than normal. The overall change in ETG's weather normalization from a regulatory liability at December 31, 2019 to a regulatory asset at June 30, 2020 was due to timing of collections from customers and warmer than normal weather during the winter months.

OTHER REGULATORY ASSETS - ~~Some of the assets included in Other Regulatory Assets are currently being recovered~~The increase from ~~ratepayers as approved by the BPU. Management believes the remaining deferred~~December 31, 2020 to March 31, 2021 is primarily related to incremental costs ~~are probable of recovery from ratepayers through future utility rates. Included in Other Regulatory Assets for SJG is the impact of the ERIP on SJG employees, see Note 1~~incurred related to the ~~Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for~~impacts to our business from the year ended December 31, 2019. The increase in Other Regulatory Assets for SJG is primarily due to a $10.1 million reclassification of costs from Utility Plant to Regulatory Assets on the condensed consolidated balance sheet related to a previous project to re-power the former BL England facility with natural gas. ~~RC Cape May Holdings, LLC has communicated to SJG that it no longer intends to proceed with a project to re-power the former BL England facility with natural gas. As~~ of March 2020, SJG had determined that the project under construction will be abandoned. SJG requested that the project costs spent to date be recovered as a regulatory asset within its March 2020 rate case petition filed with the BPU. The matter is currently pending with the BPU.

COVID-19 pandemic. On July 2, 2020, the BPU issued an Order authorizing New Jersey's regulated utilities to create a COVID-19-related regulatory asset by deferring on their books and records the prudently incurred incremental costs related to COVID-19 beginning on March 9, 2020 and continuing through September 30, 2021, or 60 days after the termination of the public health emergency, whichever is later. The Company ~~will be~~is required to file quarterly reports with the BPU, along with a petition of recovery of such incremental costs with the BPU by December 31, 2021 or within 60 days of the close of the tracking period, whichever is later. ~~During the second quarter~~As of March 31, 2021 and December 31, 2020, ETG deferred $7.8 million and $5.8 million, respectively, and SJG deferred ~~$9.0~~$6.8 million and ~~$0.7~~$4.7 million, respectively, of incremental costs principally related to expected credit losses from uncollectibles as a result of the COVID-19

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pandemic, specifically related to changes in payment patterns observed to date and consideration of macroeconomic factors. We have deemed these costs to be probable of recovery.

The Utilities Regulatory Liabilities as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consisted of the following items (in thousands):


		June 30, 2020															March 31, 2021
		SJG		ETG		ELK		Total SJI			SJG		ETG		Total SJI
Excess Plant Removal Costs	Excess Plant Removal Costs	$	13,853	$	38,847	$	—	$	52,700	Excess Plant Removal Costs	$	12,730	$	33,772	$	46,502
Excess Deferred Taxes	Excess Deferred Taxes	241,376		115,791		—		357,167		Excess Deferred Taxes	225,008		113,166		338,174
Deferred Revenues - Net		—		15,205		—		15,205
Deferred Gas Costs - Net										Deferred Gas Costs - Net	0		22,689		22,689

Amounts to be Refunded to Customers	Amounts to be Refunded to Customers	—		8,500		—		8,500		Amounts to be Refunded to Customers	0		9,257		9,257
Other Regulatory Liabilities	Other Regulatory Liabilities	—		576		—		576		Other Regulatory Liabilities	0		1,467		1,467

Total Regulatory Liabilities	Total Regulatory Liabilities	$	255,229	$	178,919	$	—	$	434,148	Total Regulatory Liabilities	$	237,738	$	180,351	$	418,089

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		December 31, 2019															December 31, 2020
		SJG		ETG		ELK		Total SJI			SJG		ETG		Total SJI
Excess Plant Removal Costs	Excess Plant Removal Costs	$	16,333	$	36,343	$	—	$	52,676	Excess Plant Removal Costs	$	12,666	$	37,953	$	50,619
Excess Deferred Taxes	Excess Deferred Taxes	251,355		117,695		—		369,050		Excess Deferred Taxes	232,694		113,888		346,582
Deferred Revenues - Net		—		52		—		52
CIP Payable		6,794		—		—		6,794
WNC		—		2,684		—		2,684
Deferred Gas Costs - Net										Deferred Gas Costs - Net	0		15,322		15,322

Amounts to be Refunded to Customers	Amounts to be Refunded to Customers	—		10,625		—		10,625		Amounts to be Refunded to Customers	0		6,969		6,969
Other Regulatory Liabilities	Other Regulatory Liabilities	—		1,037		—		1,037		Other Regulatory Liabilities	0		1,085		1,085

Total Regulatory Liabilities	Total Regulatory Liabilities	$	274,482	$	168,436	$	—	$	442,918	Total Regulatory Liabilities	$	245,360	$	175,217	$	420,577

EXCESS DEFERRED TAXES - This liability is recognized as a result of Tax Reform enacted into law on December 22, 2017. The decrease in ~~this liability~~these liabilities for SJI and SJG from December 31, ~~2019~~2020 to ~~June 30, 2020~~March 31, 2021 is related to excess tax amounts returned to customers through customer billings. ~~The Unprotected amount~~See Note 10 of ~~excess deferred taxes will be returned to customers over a~~ ~~five~~ ~~year period. The determination of the treatment~~SJI's and SJG's Annual Report on Form 10-K for the ~~remaining amount of excess deferred taxes will be deferred until SJG's next base rate case as approved by the BPU (see Note 7).~~year ended December 31, 2020.

~~DEFERRED REVENUES - NET - Over/under collections~~

Table of gas costs are monitored through ETG's bill credit. Net under-collected gas costs are classified as a regulatory asset and net over-collected gas costs are classified as a regulatory liability. Derivative contracts used to hedge natural gas purchases are also included in the BGSS, subject to BPU approval. The regulatory liability as of June 30, 2019 is a result of over-collection and refunds from a third party gas supplier (see Note 1).Contents

9. PENSION AND OTHER POSTRETIREMENT BENEFITS:

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ net periodic benefit cost related to the SJI employee and officer pension and other postretirement benefit plans consisted of the following components (in thousands):


		Pension Benefits														Pension Benefits
		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Service Cost	Service Cost	$	1,688	$	1,081	$	3,375	$	2,800	Service Cost	$	1,591	$	1,688
Interest Cost	Interest Cost	3,763		4,435		7,526		8,664		Interest Cost	3,236		3,763
Expected Return on Plan Assets	Expected Return on Plan Assets	(5,452)		(4,942)		(10,904)		(10,135)		Expected Return on Plan Assets	(5,834)		(5,452)
Amortizations:	Amortizations:									Amortizations:
Prior Service Cost	Prior Service Cost	26		27		53		53		Prior Service Cost	25		26
Actuarial Loss	Actuarial Loss	2,715		2,360		5,430		4,797		Actuarial Loss	3,194		2,715
Net Periodic Benefit Cost	Net Periodic Benefit Cost	2,740		2,961		5,480		6,179		Net Periodic Benefit Cost	2,212		2,740
Capitalized Benefit Cost	Capitalized Benefit Cost	(517)		(374)		(1,061)		(968)		Capitalized Benefit Cost	(566)		(544)
Deferred Benefit Cost	Deferred Benefit Cost	(408)		(653)		(816)		(1,194)		Deferred Benefit Cost	(316)		(408)
Total Net Periodic Benefit Expense	Total Net Periodic Benefit Expense	$	1,815	$	1,934	$	3,603	$	4,017	Total Net Periodic Benefit Expense	$	1,330	$	1,788

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		Other Postretirement Benefits														Other Postretirement Benefits
		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Service Cost	Service Cost	$	165	$	37	$	329	$	271	Service Cost	$	212	$	165
Interest Cost	Interest Cost	608		806		1,216		1,434		Interest Cost	475		608
Expected Return on Plan Assets	Expected Return on Plan Assets	(1,346)		(1,133)		(2,691)		(2,282)		Expected Return on Plan Assets	(1,436)		(1,346)
Amortizations:	Amortizations:									Amortizations:
Prior Service Cost	Prior Service Cost	(144)		(145)		(288)		(288)		Prior Service Cost	(156)		(144)
Actuarial Loss	Actuarial Loss	193		321		385		584		Actuarial Loss	273		192
Net Periodic Benefit Cost	Net Periodic Benefit Cost	(524)		(114)		(1,049)		(281)		Net Periodic Benefit Cost	(632)		(525)
Capitalized Benefit Cost	Capitalized Benefit Cost	(106)		(99)		(214)		(155)		Capitalized Benefit Cost	(106)		(108)
Deferred Benefit Cost	Deferred Benefit Cost	396		119		792		235		Deferred Benefit Cost	337		396
Total Net Periodic Benefit Expense	Total Net Periodic Benefit Expense	$	(234)	$	(94)	$	(471)	$	(201)	Total Net Periodic Benefit Expense	$	(401)	$	(237)

The Pension Benefits Net Periodic Benefit Cost incurred by SJG was approximately ~~$1.9~~$1.6 million and ~~$2.1~~$1.9 million of the totals presented in the table above for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively and $3.7 million and $4.4 million of the totals presented in the table above for the six months ended June 30, 2020 and 2019,~~ respectively. The weighted average expected long term rate of return on plan assets used to determine the net benefit cost was 7.25%.

~~For the three months ended June 30, 2020 and 2019, the~~The Other Postretirement Benefits Net Periodic Benefit Cost incurred by SJG was ~~$(0.7)~~approximately $(0.5) million and ~~$(0.1)~~$0.7 million ~~respectively,~~ of the totals presented in the table above ~~and,~~ for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, $(1.4) million and $(0.2) million, respectively, of the totals presented in the table above.~~respectively. The weighted average expected long term rate of return on plan assets used to determine the net benefit cost was 6.75%.

Capitalized benefit costs reflected in the table above relate to the Utilities' construction programs.

Companies with publicly traded equity securities that sponsor a postretirement benefit plan are required to fully recognize, as an asset or liability, the overfunded or underfunded status of its benefit plans and recognize changes in the funded status in the year in which the changes occur. Changes in funded status are generally reported in AOCL; however, since the Utilities recover all prudently incurred pension and postretirement benefit costs from their ratepayers, a significant portion of the changes resulting from the recording of additional liabilities under this requirement are reported as regulatory assets.

NaN contributions were made to the pension plans by either SJI or SJG during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 or ~~2019.~~2020. Future pension contributions by SJI and SJG do 0t expect to make any contributions to the pension plans during the remainder of 2020; however, changes in future investment performance and discount rates may ultimately result in a contribution.cannot be determined at this time. Payments related to the unfunded SERP for SJG are expected to be approximately $3.7 million in ~~2020.~~2021.

~~The plans include a qualified defined benefit, trusteed, pension plan covering most eligible employees. The qualified pension plan is funded in accordance with requirements~~

Table of the ERISA. The Company also provides certain non-qualified defined benefit and defined contribution pension plans for a selected group of the Company's management and highly compensated employees. Benefits under these non-qualified pension plans are funded on a cash basis. In addition, the entities have a postretirement benefit plan, which provides certain medical care and life insurance benefits for eligible retired employees through a postretirement benefit plan.Contents

See Note 12 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for additional information related to SJI’s and SJG's pension and other postretirement benefits.

~~Table of Contents~~

10. LINES OF CREDIT & SHORT-TERM BORROWINGS:

Credit facilities and available liquidity as of ~~June 30, 2020~~March 31, 2021 were as follows (in thousands):


Company	Company	Total Facility		Usage			Available Liquidity		Expiration Date	Company	Total Facility		Usage			Available Liquidity		Expiration Date
SJI:	SJI:									SJI:
SJI Syndicated Revolving Credit Facility	SJI Syndicated Revolving Credit Facility	$	500,000	$	28,000	(A)	$	472,000	August 2022	SJI Syndicated Revolving Credit Facility	$	500,000	$	136,700	(A)	$	363,300	August 2022

Term Loan Credit Agreement		150,000		150,000			—		March 2021

Total SJI	Total SJI	650,000		178,000			472,000			Total SJI	500,000		136,700			363,300

SJG:	SJG:									SJG:
Commercial Paper Program/Revolving Credit Facility	Commercial Paper Program/Revolving Credit Facility	200,000		161,300		(B)	38,700		August 2022	Commercial Paper Program/Revolving Credit Facility	200,000		1,400		(B)	198,600		August 2022
Uncommitted Bank Line	Uncommitted Bank Line	10,000		—			10,000		September 2020 (D)	Uncommitted Bank Line	10,000		0			10,000		September 2021

Total SJG	Total SJG	210,000		161,300			48,700			Total SJG	210,000		1,400			208,600

ETG/SJIU:	ETG/SJIU:									ETG/SJIU:
ETG/SJIU Revolving Credit Facility	ETG/SJIU Revolving Credit Facility	200,000		124,900		(C)	75,100		April 2022	ETG/SJIU Revolving Credit Facility	200,000		45,100		(C)	154,900		April 2023

Total	Total	$	1,060,000	$	464,200		$	595,800		Total	$	910,000	$	183,200		$	726,800

(A) Includes letters of credit outstanding in the amount of ~~$9.6~~$9.5 million, which is used to enable SJE to market retail electricity as well as for various construction and operating activities.

(B) Includes letters of credit outstanding in the amount of ~~$0.8~~$1.4 million, which supports the remediation of environmental conditions at certain locations in SJG's service territory.

~~(D) SJG intends to renew this facility prior to expiration.~~

For SJI and SJG, the ~~$464.2 million~~amount of usage shown in the table above, less the letters of credit noted in (A)-(C) for SJI and (B) for SJG above, ~~equal~~equals the ~~$452.8 million~~amounts recorded as Notes Payable on the respective condensed consolidated balance sheets as of June 30, 2020. For SJG, the $161.3 million of usage in the table above, less the letters of credit noted in (B) above, equal the $160.5 million recorded as Notes Payable on the condensed balance sheets as of June 30, 2020.March 31, 2021.

~~On March 26, 2020,~~During the first quarter of 2021, SJI ~~entered into an unsecured~~paid off its $150.0 million term loan agreement ~~which bears interest~~ at variable rates. The maturity date of the term loan is March 25, 2021, and the loan is recorded in Notes Payable on the condensed consolidated balance sheets as of June 30, 2020. The proceeds of the loan were used for general corporate purposes.maturity.

~~See Note 14 for information related to amounts previously outstanding under revolving credit facilities and short-term loan arrangements.~~

SJI's Five Year Revolving Credit Agreement ("Credit Agreement") allows SJI to borrow in the form of revolving loans a total aggregate amount of $500.0 million. In addition, as part of the total $500.0 million extension of credit, the Credit Agreement provides for swingline loans (in an amount not to exceed an aggregate of $50.0 million) and letters of credit (in an amount not to exceed an aggregate of $200.0 million), each at the applicable interest rates specified in the Credit Agreement. Subject to certain conditions set forth in the Credit Agreement, the Company may increase the revolving credit facility up to a maximum aggregate amount of $100.0 million (for a total facility of up to $600.0 million), although no lender is obligated to increase its commitment.

~~Table of Contents~~

SJIU and ETG (as Borrowers) have a $200.0 million revolving credit agreement ~~with several lenders. The revolving credit agreement~~which provides for the extension of credit to the Borrowers in a total aggregate amount of $200.0 million, in the form of revolving loans up to a full amount of $200.0 million, swingline loans in an amount not to exceed an aggregate of $20.0 million and letters of credit in an amount not to exceed an aggregate of $50.0 million, each at the applicable interest rates specified in the revolving credit agreement. Subject to certain conditions set forth in the revolving credit agreement, the Borrowers may increase the revolving credit facility up to a maximum aggregate amount of $50.0 million (for a total revolving facility of up to $250.0 million). This facility contains one financial covenant, limiting the ratio of indebtedness to total capitalization (as defined in the credit agreement) of each Borrower to not more than 0.70 to 1, measured at the end of each fiscal quarter.In April 2021, SJIU and ETG ~~were in compliance with this covenant at June 30, 2020.~~entered into a fourth amendment to the revolving credit agreement. The principal purpose of the amendment was to extend the termination date of the revolving credit agreement from April 29, 2022 to April 26, 2023.

~~The Utilities' (including SJG) facilities are restricted as~~

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SJG has a revolving credit facility which allows SJG to use and availability specifically to the respective Utilities; however, if necessary, the SJI facilities can also be used to support the liquidity needs of the Utilities. All committed facilities contain one financial covenant limiting the ratio of indebtedness to total capitalization of the applicable borrowers (as definedborrow in the ~~respective credit agreements), measured on~~form of revolving loans a ~~quarterly basis. SJI and the Utilities were in compliance with these covenants as of June 30, 2020. Borrowings under these credit facilities are at market rates.~~

SJI's weighted average interest rate on these borrowings (inclusive of SJG, ETG, and SJIU), which changes daily, was 1.27% and 3.45% at June 30, 2020 and 2019, respectively. SJG's weighted average interest rate on these borrowings, which changes daily, was 0.74% and 2.60% at June 30, 2020 and 2019, respectively.

SJI's average borrowings outstanding under these credit facilities (inclusive of SJG, ETG, and SJIU), not including letters of credit, during the six months ended June 30, 2020 and 2019 were $595.3 million and $347.2 million, respectively. The maximum amounts outstanding under these credit facilities, not including letters of credit, during the six months ended June 30, 2020 and 2019 were $872.2 million and $687.2 million, respectively.

SJG's average borrowings outstanding under its credit facilities during the six months ended June 30, 2020 and 2019 were $146.3 million and $72.5 million, respectively. The maximum amounts outstanding under its credit facilities during the six months ended June 30, 2020 and 2019 were $171.7 million and $108.0 million, respectively.

The SJI and the Utilities' (including SJG) principal credit facilities are provided by a syndicate of banks. The NPA for Senior Unsecured Notes issued by SJI, and the SJG bank facilities, contain a financial covenant limiting the ratio of indebtedness to total capitalization (as defined in the respective NPA or credit agreement) to not more than 0.70 to 1, measured at the end of each fiscal quarter. For SJI, the equity units are treated as equity (as opposed to how they are classified on the condensed consolidated balance sheet, as long-term debt) for purposes of the covenant calculation. SJI and SJG were in compliance with these covenants as of June 30, 2020.

aggregate amount $200.0 million. SJG has a commercial paper program under which SJG may issue short-term, unsecured promissory notes to qualified investors up to a maximum aggregate amount outstanding at any time of $200.0 million. The notes have fixed maturities which vary by note, but may not exceed 270 days from the date of issue. Proceeds from the notes are used for general corporate purposes. SJG uses the commercial paper program in tandem with its $200.0 million revolving credit facility and ~~does not expect~~ the principal amount of borrowings outstanding under the commercial paper program and the credit facility ~~at any time to~~cannot exceed an aggregate of $200.0 million.

Each of the credit facilities are provided by a syndicate of banks. The NPA for Senior Unsecured Notes issued by SJI, and the Utilities' credit facilities, contain a financial covenant limiting the ratio of indebtedness to total capitalization (as defined in the respective NPA or credit agreement) to not more than 0.70 to 1, measured at the end of each fiscal quarter. SJI and the Utilities were in compliance with these covenants as of March 31, 2021. For SJI, the equity units are treated as equity (as opposed to how they are classified on the condensed consolidated balance sheet, as long-term debt; see Note 4) for purposes of the covenant calculation.

The credit facilities are restricted as to use and availability specifically to the respective subsidiaries; however, if necessary, the SJI facilities can also be used to support the liquidity needs of the subsidiaries. Borrowings under these credit facilities are at market rates.

Although there can be no assurance, management believes that actions presently being taken to pay off or refinance the short-term debt and borrowings that are due within the next year will be successful, as the Company has been successful in refinancing debt in the past. No adjustments have been made to the financial statements to account for this uncertainty.

The weighted average interest rate on these borrowings, which changes daily, were as follows:


	March 31, 2021		March 31, 2020
Weighted average interest rate on borrowings:
SJI (inclusive of SJG, ETG and SJIU)	1.40	%	2.02	%
SJG	0.19	%	1.76	%

Average borrowings and maximum amounts outstanding on these facilities were as follows (in thousands):


	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Average borrowings outstanding, not including LOC:
SJI (inclusive of all subsidiaries' facilities)	$	366,500	$	774,000
SJG	$	21,200	$	152,500

Maximum amounts outstanding, not including LOC:
SJI (inclusive of all subsidiaries' facilities)	$	452,900	$	872,200
SJG	$	47,500	$	171,700

11. COMMITMENTS AND CONTINGENCIES:

Except as described below, there have been no significant changes to the Company's commitments and contingencies since December 31, 2020, which are described in Note 15 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2020.

GUARANTEES — As of ~~June 30, 2020,~~March 31, 2021, SJI had issued ~~$10.2~~$11.4 million of parental guarantees on behalf of EnergyMark, an unconsolidated subsidiary. These guarantees generally expire within one year and were issued to enable the subsidiary to market retail natural gas.

GAS SUPPLY CONTRACTS - In the normal course of business, SJG, SJRG and ETG have entered into long-term contracts for natural gas supplies, firm transportation and gas storage service. The transportation and storage service agreements with interstate pipeline suppliers were made under FERC-approved tariffs. SJG and ETG's cumulative obligation for gas supply-related demand charges and reservation fees paid to suppliers for these services averages approximately $7.8 million and $4.8 million per month, respectively, and is recovered on a current basis through the BGSS. SJRG's cumulative obligation for demand charges and reservation fees paid to suppliers for these services averages approximately ~~$1.6 million~~ ~~per month. SJRG has also committed to purchase 731,250 dts/d of natural gas, from various suppliers, for terms ranging from 5 to 11 years at index-based prices.~~

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AFFILIATE LOANS - SJI has committed to provide up to $25.0 million in capital contribution loans to REV, $19.3 million of which have been issued and recorded in Notes Receivable - Affiliates on the condensed consolidated balance sheets as of both March 31, 2021 and December 31, 2020 (see Note 3). SJI anticipates issuing the remaining $5.7 million of these loans during the remainder of 2021. Additionally, the amount of capital contribution loans may be amended upward from time to time at the sole discretion of SJI per the terms of the transaction.

LONG-TERM DEBT - As discussed in Note 14 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2020, ETG expects to issue three tranches of Series 2020A-2 Bonds, that are part of the November 2020 BPA, on June 15, 2021.

AMA - ETG has an AMA with SJRG for transportation and storage capacity to meet natural gas demands. The AMA is in effect through March 31, 2022. It also requires SJRG to pay minimum annual fees of $4.25 million to ETG and includes tiered margin sharing levels between ETG and ~~SJRG (see Note 1).~~

~~TSA~~ - SJI had entered into a TSA with Southern Company Gas whereby the latter provided certain administrative and operational services. On March 16, 2020, the TSA between SJI and Southern Company Gas terminated. As of that date, Southern Company Gas no longer provides any administrative or operational services to ETG.SJRG.

COLLECTIVE BARGAINING AGREEMENTS — ~~Unionized personnel represent approximately 45%~~As of March 31, 2021, SJI and ~~58%~~its subsidiaries employed 1,155 employees compared with 1,130 employees as of ~~SJI's~~December 31, 2020. As of March 31, 2021, 304 of the total number of employees were represented by labor unions at SJG, and ~~SJG's workforce~~164 were represented by a labor union at ~~June 30,~~ETG. As of December 31, 2020, ~~respectively.~~303 of the total number of employees were represented by labor unions at SJG, and 167 were represented by a labor union at ETG. SJI has collective bargaining agreements with unions that represent these employees: IBEW Local 1293, IAM Local 76 and UWUA Local 424. SJG employees represented by the IBEW operate under a collective bargaining agreement that runs through February 2022. SJG's remaining unionized employees are represented by the IAM and operate under a collective bargaining agreement that runs through August ~~2021.~~2021; negotiations with IAM Local 76 with regard to this collective bargaining agreement are expected to commence in the near future. ETG employees represented by the UWUA operate under a collective bargaining agreement that runs through November ~~2020.~~2022.

STANDBY LETTERS OF CREDIT — See Note 10. In addition, SJG has provided $25.1 million of letters of credit under a separate facility outside of the revolving credit facility to support variable-rate demand bonds issued through the NJEDA to finance the expansion of SJG’s natural gas distribution system.

EQUITY AND CONVERTIBLE UNITS - The Company has a contract obligating the holder of the ~~units~~Equity Units to purchase from the Company, and for the Company to sell to the holder for a price in cash of $50, a certain number of shares of common stock. In April 2021, a similar contract related to SJI's Convertible Units was settled. See Note 4.

LITIGATION — SJI and SJG are subject to claims, actions and other legal proceedings arising in the ordinary course of business. Neither SJI nor SJG can make any assurance as to the outcome of any of these actions but, based on an analysis of these claims and consultation with outside counsel, we do not believe that any of these claims, other than described below, would be reasonably likely to have a material impact on the business or financial statements of SJI or SJG.

In August 2018, the State of New Jersey filed a civil enforcement action against SJG and several other current and former owners of certain property in Atlantic City, NJ alleging damage to the State's natural resources and seeking payment for damages to those natural resources, where SJG and its predecessors previously operated a manufactured gas plant. Assessment of the nature and extent of the alleged damages requires substantial analysis from multiple experts. To date, discovery has not yet taken place and there is limited precedent on a number of the legal matters involved. As a result, SJG is currently evaluating the merits of the State of New ~~Jersey's~~Jersey’s allegations. ~~At this time,~~Consequently, SJG cannot reasonably estimate or provide an assessment of the claim or any ~~assurance~~assurances regarding its ~~outcome.~~outcome; however, an adverse outcome in the litigation could have a material impact on SJG’s results of operations, financial condition, and liquidity. All parties have agreed to and begun mediation efforts. SJG intends to vigorously defend itself in this matter. This manufactured gas plant site has been fully remediated.

Liabilities related to claims are accrued when the amount or range of amounts of probable settlement costs or other charges for these claims can be reasonably estimated. For matters other than the disputes noted above, SJI has accrued approximately ~~$4.0~~$4.3 million and ~~$3.1~~$4.1 million related to all claims in the aggregate as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, of which SJG has accrued approximately ~~$1.0 million and $0.9~~$1.2 million as of ~~June 30, 2020~~both March 31, 2021 and December 31, ~~2019, respectively.~~2020.

ENVIRONMENTAL REMEDIATION COSTS — SJG incurred and recorded costs for environmental cleanup of 12 sites where SJG or its predecessors operated gas manufacturing plants. SJG stopped manufacturing gas in the 1950s. ETG is subject to environmental remediation liabilities associated with 5 former manufactured gas plant sites in New Jersey. These environmental remediation expenditures are recoverable from customers through rate mechanisms approved by the BPU (see Note 8). SJI and some of its nonutility subsidiaries also recorded costs for environmental cleanup of sites where SJF previously operated a fuel oil business and Morie maintained equipment, fueling stations and storage (see Note 3). ThereExcept as noted under "Litigation" above, there have been no significant changes to the status of SJI’s environmental remediation efforts since December 31, ~~2019,~~2020, as described in Note 15 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

12. DERIVATIVE INSTRUMENTS:

Certain SJI subsidiaries, including SJG, are involved in buying, selling, transporting and storing natural gas and buying and selling retail electricity for their own accounts as well as managing these activities for third parties. These subsidiaries are

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subject to market risk on expected future purchases and sales due to commodity price fluctuations. SJI and SJG use a variety of derivative instruments to limit this exposure to market risk in accordance with strict corporate guidelines. These derivative instruments include forward contracts, swap agreements, options contracts and futures contracts.

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As of ~~June 30, 2020,~~March 31, 2021, SJI and SJG had outstanding derivative contracts as follows:


		SJI Consolidated	SJG		SJI Consolidated	SJG
Derivative contracts intended to limit exposure to market risk to:	Derivative contracts intended to limit exposure to market risk to:			Derivative contracts intended to limit exposure to market risk to:
Expected future purchases of natural gas (in MMdts)	Expected future purchases of natural gas (in MMdts)	78.9	10.2	Expected future purchases of natural gas (in MMdts)	77.7	13.6
Expected future sales of natural gas (in MMdts)	Expected future sales of natural gas (in MMdts)	84.0	0.4	Expected future sales of natural gas (in MMdts)	104.5	0.6
Expected future purchases of electricity (in MMmWh)		0.2
Expected future sales of electricity (in MMmWh)		0.2

Basis and Index related net purchase (sale) contracts (in MMdts)		94.1	2.5

Basis and Index related net purchase contracts (in MMdts)				Basis and Index related net purchase contracts (in MMdts)	78.8	12.5

The expected future purchases and sales of electricity are not material.

These contracts, which have not been designated as hedging instruments under GAAP, are measured at fair value and recorded in Derivatives - Energy Related Assets or Derivatives - Energy Related Liabilities on the condensed consolidated balance sheets of SJI and SJG. For SJE and SJRG contracts, the net unrealized pre-tax gains (losses) for these energy-related commodity contracts are included with realized gains (losses) in Operating Revenues – Nonutility on the condensed consolidated statements of income ~~(loss)~~ for SJI. These unrealized pre-tax (losses) were ~~$(1.3)~~$(0.1) million and ~~$(0.1)~~$(0.3) million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $(1.6) million and $(12.2) million for the six months ended June 30, 2020 and 2019,~~ respectively. For ETG's and SJG's contracts, the costs or benefits are recoverable through the BGSS clause, subject to BPU approval. As a result, the net unrealized pre-tax gains ~~and losses~~(losses) for SJG and ETG energy-related commodity contracts are included with realized gains and losses in Regulatory Assets or Regulatory Liabilities on the condensed consolidated balance sheets of SJI (ETG and SJG) and SJG. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, SJI had ~~$(0.2)~~$3.2 million and ~~$(4.0)~~$2.4 million, respectively, and SJG had ~~$2.2~~$0.4 million and ~~$2.1~~$1.1 million, respectively, of unrealized gains ~~(losses)~~ included in its BGSS related to energy-related commodity contracts.

~~SJI, including~~ SJG has ~~also entered into~~ interest rate derivatives to mitigate exposure to increasing interest rates and the impact of those rates on cash flows of variable-rate debt. These interest rate derivatives are measured at fair value and recorded in Derivatives - Other on the condensed consolidated balance sheets. ~~Any unrealized gains and losses on these derivatives are being recorded in earnings over the remaining life of the derivative.~~

For ~~SJI and~~ SJG interest rate derivatives, the fair value represents the amount ~~SJI and~~ SJG would have to pay the counterparty to terminate these contracts as of those dates.

As of ~~June 30, 2020, SJI’s~~March 31, 2021, SJG’s active interest rate swaps were as follows:

Notional Amount

Fixed Interest Rate

Start Date

Maturity

Obligor

Notional Amount

Fixed Interest Rate

Start Date

Maturity

20,000,000

3.049%

3/15/2017

3/15/2027

SJI

12,500,000

3.530%

12/1/2006

2/1/2036

20,000,000

3.049%

3/15/2017

3/15/2027

SJI

12,500,000

3.430%

12/1/2006

2/1/2036

10,000,000

3.049%

3/15/2017

3/15/2027

SJI

12,500,000

3.530%

12/1/2006

2/1/2036

SJG

12,500,000

3.430%

12/1/2006

2/1/2036

SJG

~~The~~For the unrealized gains and losses on ~~interest rate derivatives that are not designated as cash flow hedges are included in Interest Charges in the condensed consolidated statements of income (loss). However, for selected~~ interest rate derivatives at SJG, management believes that, subject to BPU approval, the market value upon termination can be recovered in rates and, therefore, these unrealized ~~losses~~gains (losses) have been included in Other Regulatory Assets in the condensed consolidated balance sheets.

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The fair values of all derivative instruments, as reflected in the condensed consolidated balance sheets as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, are as follows (in thousands):


SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):									SJI (includes SJG and all other consolidated subsidiaries):
Derivatives not designated as hedging instruments under GAAP	Derivatives not designated as hedging instruments under GAAP	June 30, 2020						December 31, 2019						Derivatives not designated as hedging instruments under GAAP	March 31, 2021				December 31, 2020
		Assets		Liabilities		Assets		Liabilities			Assets		Liabilities		Assets		Liabilities
Energy-related commodity contracts:	Energy-related commodity contracts:									Energy-related commodity contracts:
Derivatives - Energy Related - Current	Derivatives - Energy Related - Current	$	31,925	$	25,963	$	52,892	$	41,965	Derivatives - Energy Related - Current	$	38,541	$	21,837	$	41,439	$	27,006
Derivatives - Energy Related - Non-Current	Derivatives - Energy Related - Non-Current	11,486		5,305		7,243		8,206		Derivatives - Energy Related - Non-Current	16,084		11,818		6,935		4,947
Interest rate contracts:	Interest rate contracts:									Interest rate contracts:
Derivatives - Other - Current	Derivatives - Other - Current	—		2,101		—		1,155		Derivatives - Other - Current	0		502		0		659
Derivatives - Other - Noncurrent	Derivatives - Other - Noncurrent	—		18,491		—		11,505		Derivatives - Other - Noncurrent	0		6,939		0		9,279
Total derivatives not designated as hedging instruments under GAAP	Total derivatives not designated as hedging instruments under GAAP	$	43,411	$	51,860	$	60,135	$	62,831	Total derivatives not designated as hedging instruments under GAAP	$	54,625	$	41,096	$	48,374	$	41,891

Total Derivatives	Total Derivatives	$	43,411	$	51,860	$	60,135	$	62,831	Total Derivatives	$	54,625	$	41,096	$	48,374	$	41,891


SJG:	SJG:									SJG:
Derivatives not designated as hedging instruments under GAAP	Derivatives not designated as hedging instruments under GAAP	June 30, 2020						December 31, 2019						Derivatives not designated as hedging instruments under GAAP	March 31, 2021				December 31, 2020
		Assets		Liabilities		Assets		Liabilities			Assets		Liabilities		Assets		Liabilities
Energy-related commodity contracts:	Energy-related commodity contracts:									Energy-related commodity contracts:
Derivatives – Energy Related – Current	Derivatives – Energy Related – Current	$	4,699	$	2,651	$	16,904	$	14,671	Derivatives – Energy Related – Current	$	4,382	$	352	$	4,053	$	2,868
Derivatives – Energy Related – Non-Current	Derivatives – Energy Related – Non-Current	143		—		5		95		Derivatives – Energy Related – Non-Current	0		275		87		190
Interest rate contracts:	Interest rate contracts:									Interest rate contracts:
Derivatives – Other - Current	Derivatives – Other - Current	—		732		—		488		Derivatives – Other - Current	0		502		0		659
Derivatives – Other - Noncurrent	Derivatives – Other - Noncurrent	—		10,675		—		7,368		Derivatives – Other - Noncurrent	0		6,939		0		9,279
Total derivatives not designated as hedging instruments under GAAP	Total derivatives not designated as hedging instruments under GAAP	$	4,842	$	14,058	$	16,909	$	22,622	Total derivatives not designated as hedging instruments under GAAP	$	4,382	$	8,068	$	4,140	$	12,996

Total Derivatives	Total Derivatives	$	4,842	$	14,058	$	16,909	$	22,622	Total Derivatives	$	4,382	$	8,068	$	4,140	$	12,996

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SJI and SJG enter into derivative contracts with counterparties, some of which are subject to master netting arrangements, which allow net settlements under certain conditions. These derivatives are presented at gross fair values on the condensed consolidated balance sheets. Information related to these offsetting arrangements were as follows (in thousands):

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As of June 30, 2020
As of March 31, 2021															As of March 31, 2021
Description	Description	Gross amounts of recognized assets/liabilities		Gross amount offset in the balance sheet		Net amounts of assets/liabilities in balance sheet		Gross amounts not offset in the balance sheet								Net amount		Description		Gross amounts of recognized assets/liabilities			Gross amount offset in the balance sheet			Net amounts of assets/liabilities in balance sheet				Gross amounts not offset in the balance sheet							Net amount
													Financial Instruments						Cash Collateral Posted			Description			Gross amounts of recognized assets/liabilities				Gross amount offset in the balance sheet			Net amounts of assets/liabilities in balance sheet			Financial Instruments			Cash Collateral Posted/(Received)		Net amount
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):																											SJI (includes SJG and all other consolidated subsidiaries):
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	$	43,411	$	—	$	43,411	$	(23,219)	(A)	$	—	$	20,192	Derivatives - Energy Related Assets		$	54,625		$	0		$	54,625						$	(26,491)		(A)		$	(5,163)		$	22,971
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	$	(31,268)	$	—	$	(31,268)	$	23,219	(B)	$	4,297	$	(3,752)	Derivatives - Energy Related Liabilities		$	(33,655)		$	0		$	(33,655)		$	26,491		(B)	$	0		$	(7,164)
Derivatives - Other	Derivatives - Other	$	(20,592)	$	—	$	(20,592)	$	—		$	—	$	(20,592)	Derivatives - Other		$	(7,441)		$	0		$	(7,441)		$	0			$	0		$	(7,441)
SJG:	SJG:														SJG:
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	$	4,842	$	—	$	4,842	$	(369)	(A)	$	—	$	4,473	Derivatives - Energy Related Assets		$	4,382		$	0		$	4,382		$	(613)		(A)	$	0		$	3,769
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	$	(2,651)	$	—	$	(2,651)	$	369	(B)	$	2,085	$	(197)	Derivatives - Energy Related Liabilities		$	(627)		$	0		$	(627)		$	613		(B)	$	0		$	(14)
Derivatives - Other	Derivatives - Other	$	(11,407)	$	—	$	(11,407)	$	—		$	—	$	(11,407)	Derivatives - Other		$	(7,441)		$	0		$	(7,441)		$	0			$	0		$	(7,441)


As of December 31, 2019
As of December 31, 2020															As of December 31, 2020
Description	Description	Gross amounts of recognized assets/liabilities		Gross amount offset in the balance sheet		Net amounts of assets/liabilities in balance sheet		Gross amounts not offset in the balance sheet								Net amount		Description		Gross amounts of recognized assets/liabilities			Gross amount offset in the balance sheet			Net amounts of assets/liabilities in balance sheet				Gross amounts not offset in the balance sheet							Net amount
													Financial Instruments						Cash Collateral Posted			Description			Gross amounts of recognized assets/liabilities				Gross amount offset in the balance sheet			Net amounts of assets/liabilities in balance sheet			Financial Instruments			Cash Collateral Posted/(Received)		Net amount
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):																											SJI (includes SJG and all other consolidated subsidiaries):
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	$	60,135	$	—	$	60,135	$	(32,185)	(A)	$	—	$	27,950	Derivatives - Energy Related Assets		$	48,374		$	0		$	48,374						$	(24,027)		(A)		$	0		$	24,347
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	$	(50,171)	$	—	$	(50,171)	$	32,185	(B)	$	12,878	$	(5,108)	Derivatives - Energy Related Liabilities		$	(31,953)		$	0		$	(31,953)		$	24,027		(B)	$	2,176		$	(5,750)
Derivatives - Other	Derivatives - Other	$	(12,660)	$	—	$	(12,660)	$	—		$	—	$	(12,660)	Derivatives - Other		$	(9,938)		$	0		$	(9,938)		$	0			$	0		$	(9,938)
SJG:	SJG:														SJG:
Derivatives - Energy Related Assets	Derivatives - Energy Related Assets	$	16,909	$	—	$	16,909	$	(11,860)	(A)	$	—	$	5,049	Derivatives - Energy Related Assets		$	4,140		$	0		$	4,140		$	(716)		(A)	$	0		$	3,424
Derivatives - Energy Related Liabilities	Derivatives - Energy Related Liabilities	$	(14,766)	$	—	$	(14,766)	$	11,860	(B)	$	2,706	$	(200)	Derivatives - Energy Related Liabilities		$	(3,058)		$	0		$	(3,058)		$	716		(B)	$	2,176		$	(166)
Derivatives - Other	Derivatives - Other	$	(7,856)	$	—	$	(7,856)	$	—		$	—	$	(7,856)	Derivatives - Other		$	(9,938)		$	0		$	(9,938)		$	0			$	0		$	(9,938)

(A) The balances at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were related to derivative liabilities which can be net settled against derivative assets.

(B) The balances at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were related to derivative assets which can be net settled against derivative liabilities.

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The effect of derivative instruments on the condensed consolidated statements of income ~~(loss)~~ are as follows (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
Derivatives in Cash Flow Hedging Relationships under GAAP		2020		2019		2020		2019
Derivatives Previously in Cash Flow Hedging Relationships under GAAP										Derivatives Previously in Cash Flow Hedging Relationships under GAAP	2021		2020
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):									SJI (includes SJG and all other consolidated subsidiaries):
Interest Rate Contracts:	Interest Rate Contracts:									Interest Rate Contracts:
Losses reclassified from AOCL into income (a)	Losses reclassified from AOCL into income (a)	$	(12)	$	(12)	$	(24)	$	(24)	Losses reclassified from AOCL into income (a)	$	(12)	$	(12)

SJG:	SJG:									SJG:
Interest Rate Contracts:	Interest Rate Contracts:									Interest Rate Contracts:
Losses reclassified from AOCL into income (a)	Losses reclassified from AOCL into income (a)	$	(12)	$	(12)	(24)		(24)		Losses reclassified from AOCL into income (a)	$	(12)	$	(12)

(a) Included in Interest Charges


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
Derivatives Not Designated as Hedging Instruments under GAAP	Derivatives Not Designated as Hedging Instruments under GAAP	2020		2019		2020		2019		Derivatives Not Designated as Hedging Instruments under GAAP	2021		2020
SJI (includes SJG and all other consolidated subsidiaries):
SJI (no balances for SJG; includes all other consolidated subsidiaries):										SJI (no balances for SJG; includes all other consolidated subsidiaries):
Losses on energy-related commodity contracts (a)	Losses on energy-related commodity contracts (a)	$	(1,285)	$	(143)	$	(1,561)	$	(12,203)	Losses on energy-related commodity contracts (a)	$	(44)	$	(276)
Losses on interest rate contracts (b)	Losses on interest rate contracts (b)	(336)		(1,745)		(4,382)		(2,835)		Losses on interest rate contracts (b)	0		(4,046)

Total	Total	$	(1,621)	$	(1,888)	$	(5,943)	$	(15,038)	Total	$	(44)	$	(4,322)

(a) Included in Operating Revenues - Nonutility

(b) Included in Interest Charges

Certain of SJI’s derivative instruments contain provisions that require immediate payment or demand immediate and ongoing collateralization on derivative instruments in net liability positions in the event of a material adverse change in the credit standing of SJI. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position on ~~June 30, 2020,~~March 31, 2021 is ~~approximately $0.3 million. If the credit-risk-related contingent features underlying these agreements were triggered on June 30, 2020,~~not material. The amount SJI would have been required to pay to settle the instruments immediately or post collateral to its counterparties ~~of approximately $0.2 million~~if the credit-risk-related contingent features underlying these agreements were triggered on March 31, 2021 after offsetting asset positions with the same counterparties under master netting ~~arrangements.~~arrangements, is also not material.

13. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

GAAP establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques. The levels of the hierarchy are described below:

•Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy.

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For financial assets and financial liabilities measured at fair value on a recurring basis, information about the fair value measurements for each major category is as follows (in thousands):


As of June 30, 2020		Total		Level 1		Level 2		Level 3
As of March 31, 2021										As of March 31, 2021	Total		Level 1		Level 2		Level 3
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):									SJI (includes SJG and all other consolidated subsidiaries):
Assets	Assets									Assets
Available-for-Sale Securities (A)	Available-for-Sale Securities (A)	$	40	$	40	$	—	$	—	Available-for-Sale Securities (A)	$	32	$	32	$	0	$	0
Derivatives – Energy Related Assets (B)	Derivatives – Energy Related Assets (B)	43,411		10,868		15,591		16,952		Derivatives – Energy Related Assets (B)	54,625		11,509		30,544		12,572
		$	43,451	$	10,908	$	15,591	$	16,952		$	54,657	$	11,541	$	30,544	$	12,572
SJG:	SJG:									SJG:
Assets	Assets									Assets
Derivatives – Energy Related Assets (B)	Derivatives – Energy Related Assets (B)	$	4,842	$	369	$	107	$	4,366	Derivatives – Energy Related Assets (B)	$	4,382	$	974	$	6	$	3,402
		$	4,842	$	369	$	107	$	4,366		$	4,382	$	974	$	6	$	3,402
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):									SJI (includes SJG and all other consolidated subsidiaries):
Liabilities	Liabilities									Liabilities
Derivatives – Energy Related Liabilities (B)	Derivatives – Energy Related Liabilities (B)	$	31,268	$	15,004	$	11,563	$	4,701	Derivatives – Energy Related Liabilities (B)	$	33,655	$	3,582	$	28,921	$	1,152
Derivatives – Other (C)	Derivatives – Other (C)	20,592		—		20,592		—		Derivatives – Other (C)	7,441		0		7,441		0
		$	51,860	$	15,004	$	32,155	$	4,701		$	41,096	$	3,582	$	36,362	$	1,152
SJG:	SJG:									SJG:
Liabilities	Liabilities									Liabilities
Derivatives – Energy Related Liabilities (B)	Derivatives – Energy Related Liabilities (B)	$	2,651	$	2,454	$	196	$	1	Derivatives – Energy Related Liabilities (B)	$	627	$	613	$	3	$	11
Derivatives – Other (C)	Derivatives – Other (C)	11,407		—		11,407		—		Derivatives – Other (C)	7,441		0		7,441		0
		$	14,058	$	2,454	$	11,603	$	1		$	8,068	$	613	$	7,444	$	11


As of December 31, 2019		Total		Level 1		Level 2		Level 3
As of December 31, 2020										As of December 31, 2020	Total		Level 1		Level 2		Level 3
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):									SJI (includes SJG and all other consolidated subsidiaries):
Assets	Assets									Assets
Available-for-Sale Securities (A)	Available-for-Sale Securities (A)	$	40	$	40	$	—	$	—	Available-for-Sale Securities (A)	$	32	$	32	$	0	$	0
Derivatives – Energy Related Assets (B)	Derivatives – Energy Related Assets (B)	60,135		16,931		17,841		25,363		Derivatives – Energy Related Assets (B)	48,374		11,447		23,527		13,400
		$	60,175	$	16,971	$	17,841	$	25,363		$	48,406	$	11,479	$	23,527	$	13,400
SJG:	SJG:									SJG:
Assets	Assets									Assets
Derivatives – Energy Related Assets (B)	Derivatives – Energy Related Assets (B)	$	16,909	$	11,860	$	—	$	5,049	Derivatives – Energy Related Assets (B)	$	4,140	$	715	$	32	$	3,393
		$	16,909	$	11,860	$	—	$	5,049		$	4,140	$	715	$	32	$	3,393

SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):									SJI (includes SJG and all other consolidated subsidiaries):
Liabilities	Liabilities									Liabilities
Derivatives – Energy Related Liabilities (B)	Derivatives – Energy Related Liabilities (B)	$	50,171	$	34,446	$	7,936	$	7,789	Derivatives – Energy Related Liabilities (B)	$	31,953	$	8,605	$	20,954	$	2,394
Derivatives – Other (C)	Derivatives – Other (C)	12,660		—		12,660		—		Derivatives – Other (C)	9,938		0		9,938		0
		$	62,831	$	34,446	$	20,596	$	7,789		$	41,891	$	8,605	$	30,892	$	2,394
SJG:	SJG:									SJG:
Liabilities	Liabilities									Liabilities
Derivatives – Energy Related Liabilities (B)	Derivatives – Energy Related Liabilities (B)	$	14,766	$	14,565	$	187	$	14	Derivatives – Energy Related Liabilities (B)	$	3,058	$	2,891	$	159	$	8
Derivatives – Other (C)	Derivatives – Other (C)	7,856		—		7,856		—		Derivatives – Other (C)	9,938		0		9,938		0
		$	22,622	$	14,565	$	8,043	$	14		$	12,996	$	2,891	$	10,097	$	8

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Counterparty credit risk and the credit risk of SJI are incorporated and considered in the valuation of all derivative instruments as appropriate. The effect of counterparty credit risk and the credit risk of SJI on the derivative valuations is not significant.

(A) Available-for-Sale Securities include securities that are traded in active markets and securities that are not traded publicly. The securities traded in active markets are valued using the quoted principal market close prices that are provided by the trustees and are categorized in Level 1 in the fair value hierarchy.

(B) Derivatives – Energy Related Assets and Liabilities are traded in both exchange-based and non-exchange-based markets. Exchange-based contracts are valued using unadjusted quoted market sources in active markets and are categorized in Level 1 in the fair value ~~hierarchy - established by FASB ASC Topic 820 - “Fair Value Measurements and Disclosures.”~~hierarchy. Certain non-exchange-based contracts are valued using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask mid-point prices and are obtained from sources that management believes provide the most liquid market. Management reviews and corroborates the price quotations with at least one additional source to ensure the prices are observable market information, which includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration. Derivative instruments that are used to limit our exposure to changes in interest rates on variable-rate, long-term debt are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management judgment, as a result, these instruments are categorized in Level 2 in the fair value hierarchy. For non-exchange-based derivatives that trade in less liquid markets with limited pricing information, model inputs generally would include both observable and unobservable inputs. In instances where observable data is unavailable, management considers the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility and contract duration. Such instruments are categorized in Level 3 in the fair value hierarchy as the model inputs generally are not observable. Counterparty credit risk and the credit risk of SJI are incorporated and considered in the valuation of all derivative instruments as appropriate. The effect of counterparty credit risk and the credit risk of SJI on the derivative valuations is not significant.

~~Significant Unobservable Inputs -~~ Management uses the discounted cash flow model to value Level 3 physical and financial forward contracts, which calculates mark-to-market valuations based on forward market prices, original transaction prices, volumes, risk-free rate of return and credit spreads. Inputs to the valuation model are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third party pricing sources. The validity of the mark-to-market valuations and changes in these values from period to period are examined and qualified against historical expectations by the risk management function. If any discrepancies are identified during this process, the mark-to-market valuations or the market pricing information is evaluated further and adjusted, if necessary.

(C) Derivatives – ~~Other~~Derivative instruments that are used to limit our exposure to changes in interest rates on variable-rate, long-term debt are valued using quoted prices on commonly quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management ~~judgment.~~judgment, as a result, these instruments are categorized in Level 2 in the fair value hierarchy.

The following table provides quantitative information regarding significant unobservable inputs in Level 3 fair value measurements (in thousands, except for ranges):

SJI (includes SJG and all other consolidated subsidiaries):

Type

Fair Value at June 30, 2020

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Type

Fair Value at March 31, 2021

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Assets

Liabilities

Assets

Liabilities

Forward Contract - Natural Gas

$15,279

$2,953

Discounted Cash Flow

Forward price (per dt)

$1.27 - $6.47 [$2.74]

(A)

Forward Contract - Natural Gas

$12,367

$826

Discounted Cash Flow

Forward price (per dt)

$1.33 - $6.61 [$2.61]

(A)

Forward Contract - Electric

td,673

td,748

Discounted Cash Flow

Fixed electric load profile (on-peak)

40.34% - 100.00% [58.15%]

(B)

Forward Contract - Electric

td05

$326

Discounted Cash Flow

Fixed electric load profile (on-peak)

40.34% - 100.00% [70.51%]

(B)

Forward Contract - Electric

td05

$326

Discounted Cash Flow

Fixed electric load profile (off-peak)

0.00% - 59.66% [29.49%]

(B)

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Type

Fair Value at December 31, 2019

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Type

Fair Value at December 31, 2020

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Assets

Liabilities

Assets

Liabilities

Forward Contract - Natural Gas

$21,645

$4,333

Discounted Cash Flow

Forward price (per dt)

$1.57 - $7.28 [$2.38]

(A)

Forward Contract - Natural Gas

$12,824

$1,764

Discounted Cash Flow

Forward price (per dt)

$1.44 - $6.77 [$2.67]

(A)

Forward Contract - Electric

$3,718

$3,456

Discounted Cash Flow

Fixed electric load profile (on-peak)

0.00% - 100.00% [55.46%]

(B)

Forward Contract - Electric

$576

$630

Discounted Cash Flow

Fixed electric load profile (on-peak)

40.34% - 100.00% [65.69%]

(B)

Forward Contract - Electric

$576

$630

Discounted Cash Flow

Fixed electric load profile (off-peak)

0.00% - 59.66% [34.31%]

(B)

SJG:

Type

Fair Value at June 30, 2020

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Type

Fair Value at March 31, 2021

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Assets

Liabilities

Assets

Liabilities

Forward Contract - Natural Gas

4,366

Discounted Cash Flow

Forward price (per dt)

$1.34 - $4.98 [$3.72]

(A)

Forward Contract - Natural Gas

3,402

Discounted Cash Flow

Forward price (per dt)

$1.75 - $5.03 [$3.12]

(A)

Type

Fair Value at December 31, 2019

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Type

Fair Value at December 31, 2020

Valuation Technique

Significant Unobservable Input

Range
[Weighted Average]

Assets

Liabilities

Assets

Liabilities

Forward Contract - Natural Gas

5,049

Discounted Cash Flow

Forward price (per dt)

$1.85 - $3.61 [$3.02]

(A)

Forward Contract - Natural Gas

3,393

Discounted Cash Flow

Forward price (per dt)

$2.48 - $3.63 [$3.16]

(A)

(A) Represents the range, along with the weighted average, of forward prices for the sale and purchase of natural gas.

(B) Represents the range, along with the weighted average, of the percentage of contracted usage that is loaded during on-peak hours versus off-peak.

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The changes in fair value measurements of Derivatives – Energy Related Assets and Liabilities, using significant unobservable inputs (Level 3), are as follows (in thousands):


		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020			Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
SJI (includes SJG and all other consolidated subsidiaries):	SJI (includes SJG and all other consolidated subsidiaries):					SJI (includes SJG and all other consolidated subsidiaries):
Balance at beginning of period	Balance at beginning of period	$	18,979	$	17,574	Balance at beginning of period	$	11,006	$	17,574
Other Changes in Fair Value from Continuing and New Contracts, Net	Other Changes in Fair Value from Continuing and New Contracts, Net	(2,386)		7,017		Other Changes in Fair Value from Continuing and New Contracts, Net	5,477		9,403
Settlements	Settlements	(4,342)		(12,340)		Settlements	(5,063)		(7,999)

Balance at end of period	Balance at end of period	$	12,251	$	12,251	Balance at end of period	$	11,420	$	18,978

SJG:	SJG:					SJG:
Balance at beginning of period	Balance at beginning of period	$	4,806	$	5,035	Balance at beginning of period	$	3,385	$	5,035
Other Changes in Fair Value from Continuing and New Contracts, Net	Other Changes in Fair Value from Continuing and New Contracts, Net	(441)		4,365		Other Changes in Fair Value from Continuing and New Contracts, Net	3,391		4,806
Settlements	Settlements	—		(5,035)		Settlements	(3,385)		(5,035)

Balance at end of period	Balance at end of period	$	4,365	$	4,365	Balance at end of period	$	3,391	$	4,806

Three Months Ended
June 30, 2019 Six Months Ended
June 30, 2019
SJI (includes SJG and all other consolidated subsidiaries):
Balance at beginning of period $ 8,277 $ 16,061
Other Changes in Fair Value from Continuing and New Contracts, Net 6,553 4,285
Settlements (4,870) (10,386)
Balance at end of period $ 9,960 $ 9,960
SJG:
Balance at beginning of period $ 1,706 $ 4,928
Other Changes in Fair Value from Continuing and New Contracts, Net 2 1,708
Settlements — (4,928)
Balance at end of period $ 1,708 $ 1,708

~~Table of Contents~~

14. LONG-TERM DEBT:

SJI and SJG had the following long-term debt-related activity during the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021:

~~On April 3, 2020,~~In March 2021, SJI ~~entered~~completed a public offering of Equity Units for gross proceeds of $300.0 million (see Note 4). As of March 31, 2021, these Equity Units were not converted into ~~an unsecured $200.0~~equity; as such, the net proceeds, after underwriting discounts and commissions, of $291.0 million ~~term loan credit agreement, which bears interest at variable rates. The maturity of the term loan is October 31, 2021. Proceeds from the debt were used to pay off the following:~~

•~~$50.0 million outstanding on the SJI revolving credit facility, which was previously~~are recorded ~~in Notes Payable on the condensed consolidated balance sheets.~~

•~~$100.0 million SJI Term Loan, which was previously recorded in Notes Payable on the condensed consolidated balance sheets and due to mature in September 2020.~~

•~~$50.0 million SJI variable rate note, which was previously recorded in Current Portion of Long-Term Debt on the condensed consolidated balance sheets.~~

On April 16, 2020, SJG entered into a Note Purchase Agreement which provides for SJG to issue and sell its Senior Secured Notes, Series F, 2020 in the aggregate principal amount of $525.0 million in 3 Tranches, as follows: (a) Senior Secured Notes, Series F, 2020, Tranche A due April 16, 2030 in the aggregate principal amount of $150.0 million; (b) Senior Secured Notes, Series F, 2020, Tranche B due April 16, 2050 in the aggregate principal amount of $250.0 million; and (c) Senior Secured Notes, Series F, 2020, Tranche C expected to be due October 1, 2050 in the aggregate principal amount of $125.0 million. All of the Tranche A Notes and the Tranche B Notes were issued on April 16, 2020, and bear interest at 3.28% and 3.93%, respectively. The Tranche C Notes are expected to be issued on October 1, 2020.

On April 26, 2020, SJG used proceeds from Tranche A and B discussed above to pay off $400.0 million principal amount outstanding on its term loan credit agreement, which was previously recorded in Current Portion of Long-Term Debt on the condensed consolidated balance sheets.

On ~~May 27, 2020, SJI entered into a Note Purchase Agreement which provides for~~April 1, 2021, additional proceeds were received as the ~~Company~~underwriters exercised their option to ~~issue an aggregate~~purchase additional Equity Units (see Notes 4 and 18). Gross proceeds were approximately $35.0 million, with net proceeds, after deducting underwriting discounts and commissions, of $200.0 million of senior unsecured notes in 2 tranches, as follows: (a) Senior Notes, Series 2020A due July 30, 2027, in the aggregate principal amount of $75.0 million (the "Series 2020A Notes"); and (b) Senior Notes, Series 2020B due July 30, 2030, in the aggregate principal amount of $125.0 million (the "Series 2020B Notes"). The Company issued the Notes on July 30, 2020 (see Note 20). The Series 2020A Notes will bear interest at 3.71% and the Series 2020B Notes will bear interest at 3.91%. The proceeds from this issuance were used to pay off the unsecured $200.0 million term loan credit agreement issued in April 2020, which was paid off on July 31, 2020 (see Note 20).approximately $34.0 million.

~~15. ACCUMULATED OTHER COMPREHENSIVE LOSS:~~

~~The following table summarizes the changes in SJI's AOCL for the three and six months ended June 30, 2020 (in thousands):~~

Postretirement Liability Adjustment Unrealized Gain (Loss) on Derivatives-Other (A) Unrealized Gain (Loss) on Available-for-Sale Securities Other Comprehensive Income (Loss) of Affiliated Companies Total
Balance at April 1, 2020 $ (32,124) $ (319) $ (10) $ (97) $ (32,550)
Other comprehensive income before reclassifications — — — — —
Amounts reclassified from AOCL — 8 — — 8
Net current period other comprehensive income — 8 — — 8
Balance at June 30, 2020
$ (32,124) $ (311) $ (10) $ (97) $ (32,542)

~~Table~~In March 2021, SJG paid $2.5 million of ~~Contents~~

Postretirement Liability Adjustment Unrealized Gain (Loss) on Derivatives-Other (A) Unrealized Gain (Loss) on Available-for-Sale Securities Other Comprehensive Income (Loss) of Affiliated Companies Total
Balance at January 1, 2020 $ (32,124) $ (327) $ (10) $ (97) $ (32,558)
Other comprehensive income before reclassifications — — — — —
Amounts reclassified from AOCL — 16 — — 16
Net current period other comprehensive income — 16 — — 16
Balance at June 30, 2020
$ (32,124) $ (311) $ (10) $ (97) $ (32,542)

(A) The affected line item for these reclassifications from AOCL into the condensed consolidated statements of income (loss) is Interest Charges. These amounts are net of tax of $(4) and $(8) for the three and six months ended June 30, 2020, respectively, for which the affected line item in the condensed consolidated statements of income (loss) is Income Taxes.4.84% MTNs due annually beginning March 2021.

~~The following table summarizes the changes in SJG's AOCL for the three and six months ended June 30, 2020 (in thousands):~~

Postretirement Liability Adjustment Unrealized Gain (Loss) on Derivatives-Other (A) Total
Balance at April 1, 2020 $ (27,454) $ (413) $ (27,867)
Other comprehensive loss before reclassifications — — —
Amounts reclassified from AOCL — 8 8
Net current period other comprehensive income — 8 8
Balance at June 30, 2020
$ (27,454) $ (405) $ (27,859)

Postretirement Liability Adjustment Unrealized Gain (Loss) on Derivatives-Other (A) Total
Balance at January 1, 2020 $ (27,454) $ (421) $ (27,875)
Other comprehensive loss before reclassifications — — —
Amounts reclassified from AOCL — 16 16
Net current period other comprehensive income (loss) — 16 16
Balance at June 30, 2020
$ (27,454) $ (405) $ (27,859)

(A) The affected line item for these reclassifications from AOCL into the condensed statements of income (loss) is Interest Charges. These amounts are net of tax of $(4) and $(8) for the three and six months ended June 30, 2020, respectively, for which the affected line item in the condensed statements of income (loss) is Income Taxes.

~~Table of Contents~~

~~16.~~

Table of Contents

15. REVENUE:

At contract inception, SJI and SJG assess the goods and services promised in all of its contracts with customers, and identify a performance obligation for each promise to transfer to a customer a distinct good or service.

~~Except as described below, along with the sale of MTF as noted in Note 1, there~~There have been no significant changes to the nature of the Company's revenues or the revenue recognition policies and practices of the Company since December 31, ~~2019,~~2020, which are described in Note 19 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

SJI and SJG disaggregate revenue from contracts with customers into customer type and product line. SJI and SJG have determined that disaggregating revenue into these categories achieves the disclosure objective in ASC 606 to depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors. Further, disaggregating revenue into these categories is consistent with information regularly reviewed by the CODM in evaluating the financial performance of SJI's operating segments. SJG only operates in the SJG Utility Operations segment. See Note 6 for further information regarding SJI's operating segments.

Disaggregated revenues from contracts with customers ~~by both customer type and product line,~~ are disclosed below, by operating segment (in thousands):. The presentation of disaggregated revenues for the prior periods has been revised to conform to the realignment of our operating segments as discussed in Note 6.


Three Months Ended June 30, 2020
Three Months Ended March 31, 2021																				Three Months Ended March 31, 2021
		SJG Utility Operations		ETG Utility Operations		ELK Utility Operations		Wholesale Energy Operations		Retail Electric Operations		On-Site Energy Production		Appliance Service Operations		Corporate Services and Intersegment		Total			SJG Utility Operations		ETG Utility Operations		Wholesale Energy Operations		Retail Services		Renewables		Corporate Services and Intersegment		Total
Customer Type:	Customer Type:																			Customer Type:
Residential	Residential	$	58,964	$	40,113	$	566	$	—	$	—	$	—	$	505	$	—	$	100,148	Residential	$	166,589	$	105,904	$	—	$	512	$	—	$	—	$	273,005
Commercial & Industrial	Commercial & Industrial	24,057		20,606		700		119,852		5,654		2,154		—		(592)		172,431		Commercial & Industrial	60,313		49,654		373,967		1,607		6,423		(6,777)		485,187
OSS & Capacity Release	OSS & Capacity Release	1,463		—		—		—		—		—		—		—		1,463		OSS & Capacity Release	2,299		—		—		—		—		—		2,299
Other	Other	453		122		97		—		—		—		—		—		672		Other	761		192		—		935		—		(96)		1,792
		$	84,937	$	60,841	$	1,363	$	119,852	$	5,654	$	2,154	$	505	$	(592)	$	274,714		$	229,962	$	155,750	$	373,967	$	3,054	$	6,423	$	(6,873)	$	762,283
Product Line:
Product/Service Line:																				Product/Service Line:
Gas	Gas	$	84,937	$	60,841	$	1,363	$	119,852	$	—	$	—	$	—	$	(568)	$	266,425	Gas	$	229,962	$	155,750	$	373,967	$	—	$	—	$	(6,699)	$	752,980
Electric	Electric	—		—		—		—		5,654		—		—		(379)		5,275		Electric	—		—		—		1,607		—		(78)		1,529
Solar	Solar	—		—		—		—		—		1,390		—		—		1,390		Solar	—		—		—		—		1,911		—		1,911

Landfills	Landfills	—		—		—		—		—		764		—		—		764		Landfills	—		—		—		—		425		—		425
Fuel Cells																				Fuel Cells	—		—		—		—		4,087		—		4,087
Other	Other	—		—		—		—		—		—		505		355		860		Other	—		—		—		1,447		—		(96)		1,351
		$	84,937	$	60,841	$	1,363	$	119,852	$	5,654	$	2,154	$	505	$	(592)	$	274,714		$	229,962	$	155,750	$	373,967	$	3,054	$	6,423	$	(6,873)	$	762,283

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Six Months Ended June 30, 2020
Three Months Ended March 31, 2020																				Three Months Ended March 31, 2020
		SJG Utility Operations		ETG Utility Operations		ELK Utility Operations		Wholesale Energy Operations		Retail Electric Operations		On-Site Energy Production		Appliance Service Operations		Corporate Services and Intersegment		Total			SJG Utility Operations		ETG Utility Operations		ELK Utility Operations		Wholesale Energy Operations		Retail Services		Renewables		Corporate Services and Intersegment		Total
Customer Type:	Customer Type:																			Customer Type:
Residential	Residential	$	201,772	$	132,522	$	2,102	$	—	$	—	$	—	$	994	$	—	$	337,390	Residential	$	142,808	$	92,409	$	1,536	$	—	$	489	$	—	$	—	$	237,242
Commercial & Industrial	Commercial & Industrial	65,892		57,754		2,359		258,847		12,648		9,142		—		(2,596)		404,046		Commercial & Industrial	41,835		37,148		1,659		138,995		7,363		6,988		(2,372)		231,616
OSS & Capacity Release	OSS & Capacity Release	4,072		—		—		—		—		—		—		—		4,072		OSS & Capacity Release	2,609		—		—		—		—		—		—		2,609
Other	Other	1,010		3,971		180		—		—		—		—		—		5,161		Other	557		3,849		83		—		—		—		—		4,489
		$	272,746	$	194,247	$	4,641	$	258,847	$	12,648	$	9,142	$	994	$	(2,596)	$	750,669		$	187,809	$	133,406	$	3,278	$	138,995	$	7,852	$	6,988	$	(2,372)	$	475,956
Product Line:
Product/Service Line:																				Product/Service Line:
Gas	Gas	$	272,746	$	194,247	$	4,641	$	258,847	$	—	$	—	$	—	$	(1,657)	$	728,824	Gas	$	187,809	$	133,406	$	3,278	$	138,995	$	—	$	—	$	(1,089)	$	462,399
Electric	Electric	—		—		—		—		12,648		—		—		(1,662)		10,986		Electric	—		—		—		—		6,994		—		(1,283)		5,711
Solar	Solar	—		—		—		—		—		3,296		—		—		3,296		Solar	—		—		—		—		—		1,907		—		1,907
CHP	CHP	—		—		—		—		—		3,502		—		—		3,502		CHP	—		—		—		—		—		3,502		—		3,502
Landfills	Landfills	—		—		—		—		—		2,344		—		—		2,344		Landfills	—		—		—		—		—		1,579		—		1,579
Other	Other	—		—		—		—		—		—		994		723		1,717		Other	—		—		—		—		858		—		—		858
		$	272,746	$	194,247	$	4,641	$	258,847	$	12,648	$	9,142	$	994	$	(2,596)	$	750,669		$	187,809	$	133,406	$	3,278	$	138,995	$	7,852	$	6,988	$	(2,372)	$	475,956

Three Months Ended
June 30, 2019
SJG Utility Operations ETG Utility Operations ELK Utility Operations Wholesale Energy Operations Retail Electric Operations On-Site Energy Production Appliance Service Operations Corporate Services and Intersegment Total
Customer Type:
Residential $ 28,679 $ 27,503 $ 207 $ — $ 2,953 $ — $ 484 $ — $ 59,826
Commercial & Industrial 15,503 16,065 482 111,794 12,419 14,788 — (3,418) 167,633
OSS & Capacity Release 2,244 — — — — — — — 2,244
Other 571 1,527 39 — — — — — 2,137
$ 46,997 $ 45,095 $ 728 $ 111,794 $ 15,372 $ 14,788 $ 484 $ (3,418) $ 231,840
Product Line:
Gas $ 46,997 $ 45,095 $ 728 $ 111,794 $ — $ — $ — $ (1,234) $ 203,380
Electric — — — — 15,372 — — (2,184) 13,188
Solar —�� — — — — 6,438 — — 6,438
CHP — — — — — 6,794 — — 6,794
Landfills — — — — — 1,556 — — 1,556
Other — — — — — — 484 — 484
$ 46,997 $ 45,095 $ 728 $ 111,794 $ 15,372 $ 14,788 $ 484 $ (3,418) $ 231,840

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Six Months Ended
June 30, 2019
SJG Utility Operations ETG Utility Operations ELK Utility Operations Wholesale Energy Operations Retail Electric Operations On-Site Energy Production Appliance Service Operations Corporate Services and Intersegment Total
Customer Type:
Residential $ 213,633 $ 127,492 $ 1,961 — $ 6,761 — $ 1,015 — $ 350,862
Commercial & Industrial 61,091 58,213 2,140 311,561 25,422 26,118 — (6,425) 478,120
OSS & Capacity Release 4,014 — — — — — — — 4,014
Other 1,243 4,174 104 — — — — — 5,521
$ 279,981 $ 189,879 $ 4,205 $ 311,561 $ 32,183 $ 26,118 $ 1,015 $ (6,425) $ 838,517
Product Line:
Gas $ 279,981 $ 189,879 $ 4,205 $ 311,561 — — — $ (2,634) $ 782,992
Electric — — — — 32,183 — — (3,791) 28,392
Solar — — — — — 9,014 — — 9,014
CHP — — — — — 14,153 — — 14,153
Landfills — — — — — 2,951 — — 2,951
Other — — — — — — 1,015 — 1,015
$ 279,981 $ 189,879 $ 4,205 $ 311,561 $ 32,183 $ 26,118 $ 1,015 $ (6,425) $ 838,517

The SJG balance is a part of the SJG ~~utility operating~~Utility Operations segment, and is before intercompany eliminations with other SJI entities.

Revenues on the condensed consolidated statements of income ~~(loss)~~ that are not with contracts with customers consist of (a) revenues from alternative revenue programs at the SJG ~~ETG~~ and ~~ELK~~ETG utility operating segments (including CIP ~~AIRP, SHARP,~~ and WNC), (b) both utility and nonutility realized revenue from derivative contracts at the SJG and ETG utility, ~~wholesale energy~~Wholesale Energy Operations and ~~retail electric~~Retail Services operating segments, and (c) unrealized revenues from derivative contracts of the ~~wholesale energy~~Wholesale Energy Operations and ~~retail electric~~Retail Services operating ~~segments (see Note 12).~~segments.

The ~~Company’s~~Utilities' rate mechanisms that qualify as alternative revenue programs are described in Note 10 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. These mechanisms are subject to compliance filings on at least an annual basis, and the tariff rate adjustments are designed to occur over this compliance period. These rate mechanisms satisfy the criteria in ASC 980-605-25-4, as (a) each mechanism is established by order of the BPU for SJG and ~~ETG, and the MPSC for ELK;~~ETG; (b) the amounts recoverable under each program are determined by tracking and are probable of recovery; and (c) the adjustments to tariff rates are designed to recover from or refund to customers within a 24 month period. For each individual rate reconciling mechanism, operating revenues are recognized when allowable costs are greater than the amounts billed in the current period and are reduced when allowable costs are less than amounts billed in the current period. Total revenues arising from alternative revenue programs at SJI were ~~$(3.1)~~$1.0 million and ~~$8.8~~$47.7 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $44.6 million and $21.3 million for the six months ended June 30, 2020 and 2019,~~ respectively. Total revenues arising from alternative revenue programs at SJG were ~~$(0.2)~~$(0.8) million and ~~$8.8~~$37.1 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $37.0 million and $26.0 million for the six months ended June 30, 2020 and 2019,~~ respectively. The SJI and SJG amounts for revenues arising from alternative revenue programs were negative during the three months ended June 30, 2020 as a result of ETG's WNC program and SJG's CIP, AIRP, and SHARP programs being in a net over-collected position during the period, which caused a net reduction in operating revenues as allowable costs were less than amounts billed.

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The following table provides information about SJI's and SJG's receivables (excluding SJG receivables from related parties) and unbilled revenue from contracts with customers (in thousands):

Accounts Receivable (A) Unbilled Revenue (B)
SJI (including SJG and all other consolidated subsidiaries):
Beginning balance as of January 1, 2020 $ 253,661 $ 84,821
Ending balance as of June 30, 2020 231,434 16,148
Increase (Decrease) $ (22,227) $ (68,673)
Beginning balance as of January 1, 2019 $ 337,502 $ 79,538
Ending balance as of June 30, 2019 223,314 21,253
Increase (Decrease) $ (114,188) $ (58,285)
SJG:
Beginning balance as of January 1, 2020 $ 84,940 $ 45,016
Ending balance as of June 30, 2020 91,842 3,915
Increase (Decrease) $ 6,902 $ (41,101)
Beginning balance as of January 1, 2019 $ 101,572 $ 43,271
Ending balance as of June 30, 2019 90,190 8,415
Increase (Decrease) $ (11,382) $ (34,856)

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	Accounts Receivable (A)		Unbilled Revenue (B)
SJI (including SJG and all other consolidated subsidiaries):
Beginning balance as of January 1, 2021	$	278,723	$	85,423
Ending balance as of March 31, 2021	327,832		68,155
Increase (Decrease)	$	49,109	$	(17,268)

Beginning balance as of January 1, 2020	$	253,661	$	84,821
Ending balance as of March 31, 2020	262,850		51,973
Increase (Decrease)	$	9,189	$	(32,848)

SJG:
Beginning balance as of January 1, 2021	$	88,657	$	46,837
Ending balance as of March 31, 2021	130,286		35,362
Increase (Decrease)	$	41,629	$	(11,475)

Beginning balance as of January 1, 2020	$	84,940	$	45,016
Ending balance as of March 31, 2020	112,606		24,916
Increase (Decrease)	$	27,666	$	(20,100)

(A) Included in Accounts Receivable in the condensed consolidated balance sheets. A receivable is SJI's and SJG's right to consideration that is unconditional, as only the passage of time is required before payment is expected from the customer. ~~All of SJI's and SJG's Accounts Receivable arise from contracts with customers.~~

(B) Included in Unbilled Revenues in the condensed consolidated balance sheets. All unbilled revenue for SJI and SJG arises from contracts with customers. Unbilled revenue relates to SJI's and SJG's right to receive payment for commodity delivered but not yet billed. This represents contract assets that arise from contracts with customers, which is defined in ASC 606 as the right to payment in exchange for goods already transferred to a customer, excluding any amounts presented as a receivable. The unbilled revenue is transferred to accounts receivable when billing occurs and the rights to collection become unconditional.

~~17.~~

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16. ACQUISITIONS & BUSINESS COMBINATIONS:

There ~~were~~have been no changes to the accounting ~~policy~~policies with regards to asset acquisitions and business combinations described in Note 1 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

~~AEP Acquisition~~

~~On August 31, 2019, SJI, through its wholly-owned subsidiary SJEI, completed its acquisition of AEP for $4.0 million in total consideration, inclusive of certain working capital~~Notes 1 and ~~other closing adjustments.~~

~~AEP does not have any regulated operations.~~

~~The Company has finalized its valuation of assets and liabilities in connection with the acquisition of AEP. There are no changes to the purchase price or the allocation disclosed in Note~~ 20 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019. All~~2020 describe the asset acquisitions and business combinations that occurred in 2020, which include Catamaran/Annadale, EnerConnex, solar projects and RNG dairy farm development rights. Each of these acquisitions and business combinations occurred subsequent to March 31, 2020. The purchase price allocation for EnerConnex was finalized during the three months ended March 31, 2021, with no changes to the assets acquired and ~~financial results of AEP are included in~~liabilities assumed as reported on the ~~Corporate & Services segment. The amount of revenues and net income included in the Company's~~ condensed consolidated ~~statement~~balance sheet as of ~~income for the three and six months ended June 30, 2020 related to AEP is not material.~~

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December 31, 2020.

~~Solar Projects Acquisition~~

On June 30, 2020, the Company, through its wholly-owned subsidiary Marina, completed its acquisition of ESNJ-AL-Somerspoint LLC, ESNJ-AL-Hamiltonsquare LLC, and ESNJ-AL-Brownsmills LLC, which own and operate solar-generation sites located in New Jersey, for $2.8 million in total consideration. The total purchase price equaled the fair value of property, plant, and equipment that were acquired in the transaction. Costs related to this acquisition were not material. The purchase of these entities is in support of the New Jersey Energy Master Plan.

All assets and financial results of these entities are included in the On-Site Energy Production segment. There were 0 revenues or net income included in the Company's condensed consolidated statement of income for the three and six months ended June 30, 2020 related to these entities.

~~18.~~17. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS:

GOODWILL - Goodwill represents future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration paid or transferred over the fair value of identifiable net assets acquired. Goodwill is not amortized, but instead is subject to impairment testing on an annual basis, and between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount.

The Company performs its annual goodwill impairment test ~~in the fourth quarter~~as of October 1 of each fiscal year ~~beginning~~and on an interim basis as events and changes in circumstances occur that could be an indication of a potential impairment, including, but not limited to, a significant change in operating performance, the business climate, legal or regulatory factors, or a planned sale or disposition of a significant portion of the business.

The Company's impairment evaluations begin with a qualitative assessment at the reporting unit level. The reporting unit level is identified by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available, whether segment management regularly reviews the operating results of those components and whether the economic and regulatory characteristics are similar. Factors utilized in the qualitative analysis performed on goodwill in our reporting units include, among other things, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, company specific operating results and other relevant entity-specific events affecting individual reporting units.

If sufficient qualitative factors exist, potential goodwill impairment is ~~determined quantitatively. Potential impairment is identified~~evaluated quantitatively by comparing the fair value of a reporting unit to the book value, including goodwill. ~~The~~For each reporting unit, the Company estimates the fair value of a reporting unit using a discounted cash flow ~~analysis. Management~~analysis (an income approach) and, for certain reporting units, management also considers other methods, which includes a market multiples ~~analysis.~~analysis, and performs a weighted combination of the income approach and the market approach. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include, but are not limited to, forecasts of future operating results, discount and growth rates, capital expenditures, tax rates, ~~and~~ projected terminal ~~values.~~ ~~Changes~~values and, in ~~estimates or~~ the ~~application~~cases where market multiples analysis is utilized, implied market multiples for a selected group of ~~alternative assumptions could produce significantly different results.~~ peer companies.

If the fair value exceeds book value, goodwill of the reporting unit is not considered impaired. If the book value exceeds fair value, an impairment charge is recognized for the excess up until the amount of goodwill allocated to the reporting unit. Changes in estimates or the application of alternative assumptions could produce significantly different results.

~~As a result of the COVID-19 pandemic and the resulting macroeconomic market conditions, the~~The Company determined ~~it necessary to perform a quantitative goodwill impairment analysis on the goodwill at the ETG reporting unit~~that, as of March 31, ~~2020.~~2021, there were not indicators of impairment of the goodwill associated with its reporting units, and as such did not perform a quantitative analysis. The qualitative factors analyzed as described above also included macroeconomic conditions related to the COVID-19 pandemic. There were 0no impairments recorded ~~as a result of this interim impairment test. During~~for the ~~second quarter of 2020, management did not identify any qualitative factors indicating that it was more likely than not that the fair value of the ETG reporting unit was less than its carrying amount.~~three months ended March 31, 2021 and 2020. Should economic conditions deteriorate in future periods or ~~remain~~become depressed for a prolonged period of time, estimates of future cash flows and market valuation assumptions may not be sufficient to support the carrying value, requiring impairment charges in the future.

Total goodwill of $702.1 million was recorded on the condensed consolidated balance sheets as of both June 30, 2020 and December 31, 2019. As of both June 30, 2020 and December 31, 2019, $700.2 million was included in the ETG Utility Operations segment and $1.9 million was included in the Corporate & Services segment.

As of March 31, 2021 and December 31, 2020, SJI had $707.0 million of goodwill, including $700.2 million in the ETG Utility Operations segment and $6.8 million included in the Retail Services segment.

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IDENTIFIABLE INTANGIBLE ASSETS - The primary identifiable intangible assets of the Company are customer relationships, ~~obtained in the acquisition of AEP (see Note 17)~~interconnection and power purchase agreements at Annadale (collectively "Annadale intangible assets"), ~~along with the AMA (see Note 1).~~and an AMA. The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Considerations may include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's long-term strategy for using the asset, any laws or other local regulations which could impact the useful

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life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives (finite-lived intangible assets) are amortized, primarily on a straight-line basis, over their useful lives, generally ranging from 2 to 20 years.

SJI's identifiable intangible assets were as follows (in thousands):


		As of June 30, 2020									As of March 31, 2021
		Gross Cost		Accumulated Amortization		Identifiable Intangible Assets, Net			Gross Cost		Accumulated Amortization		Identifiable Intangible Assets, Net
Identifiable intangible assets subject to amortization:	Identifiable intangible assets subject to amortization:							Identifiable intangible assets subject to amortization:
Customer Relationships	Customer Relationships	$	2,400	$	(133)	$	2,267	Customer Relationships	$	6,900	$	(453)	$	6,447
AMA	AMA	19,200		(10,240)		8,960		AMA	19,200		(14,080)		5,120
Annadale Intangible Assets								Annadale Intangible Assets	4,220		(86)		4,134
Total	Total	$	21,600	$	(10,373)	$	11,227	Total	$	30,320	$	(14,619)	$	15,701


		As of December 31, 2019									As of December 31, 2020
		Gross Cost		Accumulated Amortization		Identifiable Intangible Assets, Net			Gross Cost		Accumulated Amortization		Identifiable Intangible Assets, Net
Identifiable intangible assets subject to amortization:	Identifiable intangible assets subject to amortization:							Identifiable intangible assets subject to amortization:
Customer Relationships	Customer Relationships	$	2,400	$	(53)	$	2,347	Customer Relationships	$	6,900	$	(338)	$	6,562
AMA	AMA	19,200		(7,680)		11,520		AMA	19,200		(12,800)		6,400
Annadale Intangible Assets								Annadale Intangible Assets	$	4,318	$	(22)	$	4,296
Total	Total	$	21,600	$	(7,733)	$	13,867	Total	$	30,418	$	(13,160)	$	17,258

The net identifiable intangible asset balances shown in the table above are included in Other Noncurrent Assets on the condensed consolidated balance sheets.

Total SJI amortization expense related to identifiable intangible assets was ~~$1.3~~$1.5 million and ~~$1.5~~$1.3 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $2.6 million and $3.0 million for the six months ended June 30, 2020 and 2019,~~ respectively. NaN impairment charges were recorded on identifiable intangible assets during the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 or ~~2019.~~2020.

As of ~~June 30, 2020,~~March 31, 2021, SJI's estimated amortization expense related to identifiable intangible assets for each of the five succeeding fiscal years is as follows (in thousands):


Year ended December 31,	Year ended December 31,	SJI	Year ended December 31,	SJI
2020 (remaining six months)		2,640
2021		5,280
2021 (remaining nine months)			2021 (remaining nine months)	$	4,377
2022	2022	1,440	2022	$	2,004
2023	2023	160	2023	$	724
2024	2024	160	2024	$	724
2025			2025	$	724

~~The decreases in estimated amortization expense in the table above are due to the AMA ceasing in March 2022 (see Note 1).~~

~~19. LEASES:~~

Except as described below, there have been no significant changes to the nature of the Company's leases since December 31, 2019, which are described in Note 9 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2019.

SJI's and SJG's real estate leases, which are comprised primarily of office space and payment centers, represent approximately 89% and 56%, respectively, of operating lease liabilities and generally have a lease term between 5 and 15 years. The remaining operating leases primarily consist of fleet vehicles (SJI only), communication towers, and general office equipment, each with various lease terms ranging between 3 and 25 years. As of June 30, 2020, SJI does not have any contracts where it is considered the lessor (see "MTF" below).

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As of both June 30, 2020 and December 31, 2019, SJI recognized right-of-use assets and lease liabilities of $1.9 million each for operating leases. The lease liability is comprised of approximately $1.7 million of real estate leases, $0.2 million of equipment leases and less than $0.1 million of fleet vehicle leases as of June 30, 2020, and $1.5 million of real estate leases, $0.3 million of equipment leases and $0.1 million of fleet vehicle leases as of December 31, 2019.

SJG recognized right-of-use assets and lease liabilities of $0.2 million each for operating leases as of June 30, 2020, and $0.3 million each for operating leases as of December 31, 2019. As of June 30, 2020, the lease liability is comprised of approximately $0.1 million of equipment leases and $0.1 million of real estate leases, and as of December 31, 2019, the lease liability is comprised of approximately $0.2 million of equipment leases and $0.1 million of real estate leases.

SJI and SJG recorded the right-of-use assets in Other Noncurrent Assets and the lease liabilities in Other Current and Noncurrent Liabilities (as shown in the table below) on the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

~~The maturity of the Company’s operating lease liabilities is as follows (in thousands):~~

As of June 30, 2020
SJI Consolidated SJG
2020 (excluding the six months ended June 30, 2020) $ 515 $ 65
2021 534 39
2022 348 21
2023 190 19
2024 165 12
Thereafter 236 102
Total future minimum lease payments 1,988 258
Less imputed interest 109 29
Total lease payments $ 1,879 $ 229
Included in the condensed consolidated balance sheet
Current lease liabilities (included in Other Current Liabilities) $ 759 $ 80
Long-term lease liabilities (included in Other Noncurrent Liabilities) 1,120 149
Total lease liabilities $ 1,879 $ 229

The total operating lease cost for SJI was $0.6 million and $1.1 million, respectively, during the three and six months ended June 30, 2020, and $0.8 million and $1.6 million during the three and six months ended June 30, 2019, respectively. The total operating lease cost for SJG was less than $0.1 million and approximately $0.1 million during the three and six months ended June 30, 2020, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2019, respectively.

~~Short-term lease costs were immaterial for both SJI and SJG. Neither SJI nor SJG had any sublease income during the three and six months ended June 30, 2020 and 2019.~~

Operating cash flows from operating leases for SJI were $0.4 million and $0.7 million during the three and six months ended June 30, 2020, respectively, and $0.4 million and $0.8 million during the three and six months ended June 30, 2019, respectively. Operating cash flows from operating leases for SJG were less than $0.1 million and approximately $0.1 million during the three and six months ended June 30, 2020, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2019, respectively.

~~Neither SJI nor SJG have leases with related parties or leverage lease arrangements. There are no leases that have not yet commenced but that create significant rights and obligations.~~

SJI had $0.2 million and $0.3 million of variable lease payments pertaining to leased back assets during the three and six months ended June 30, 2020, respectively, and $0.4 million and $0.8 million during the three and six ended June 30, 2019, respectively.

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~~Supplemental Non-Cash Disclosures~~

~~The weighted average remaining lease term for SJI's operating leases is 4.4 years at a weighted average discount rate~~

Table of ~~3.1%.~~Contents

~~The weighted average remaining lease term for SJG's operating leases is 8.4 years at a weighted average discount rate of 3.1%.~~

~~MTF~~

As of December 31, 2019, Marina was considered to be the lessor of certain thermal energy generating property and equipment under an operating lease which was set to expire in May 2027. As of December 31, 2019, the carrying costs of this property and equipment under operating lease was $68.9 million (net of accumulated depreciation of $40.6 million), and is included in Assets Held for Sale in the condensed consolidated balance sheets. As discussed in Note 1, MTF was sold to a third party buyer in February 2020, and as a result, Marina no longer is the lessor of this property, and no longer has future rentals or commitments.

~~20.~~18. SUBSEQUENT EVENTS:

~~On July 30, 2020,~~During April 2021, the following events occurred:

•Restricted shares were granted to SJI ~~issued its Series 2020A Notes~~Directors, see Note 2.

•SJI entered into transactions related to the Equity Units and ~~Series 2020B Notes for an aggregate~~2018 Corporate Units, see Note 4.

•SJI repaid the $90.0 million principal amount outstanding on its 3.43% Series 2018-A Notes at maturity.

•ETG and SJIU entered into a fourth amendment to their revolving credit agreement. See Note 10.

In April and May 2021, the Utilities received approvals from the BPU related to several of ~~$200.0 million. The proceeds from this issuance were used~~their filings related to ~~pay off the unsecured $200.0 million term loan credit agreement issued in April 2020, which was paid off on July 31, 2020 (see~~various periodic rate mechanisms, see Note ~~14).~~7.

On May 5, 2021, SJI’s board of directors declared its regular dividend of $0.3025 per share for the second quarter of 2021. The dividend is payable July ~~31, 2020, SJI, through its wholly-owned subsidiary SJIU, closed~~2, 2021 to shareholders of record at the close of business on ~~its transaction to sell ELK to a third-party buyer. Total consideration received was approximately $15.6 million, inclusive of working capital and other closing adjustments.~~June 10, 2021.

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

Introduction

Management's Discussion and Analysis of Financial Condition and Results of Operations (Management's Discussion) analyzes the financial condition, results of operations and cash flows of SJI and its subsidiaries. It also includes management’s analysis of past financial results and potential factors that may affect future results, potential future risks and approaches that may be used to manage them. Except where the content clearly indicates otherwise, “SJI,” “we,” “us” or “our” refers to the holding company or the consolidated entity of SJI and all of its subsidiaries.

Management's Discussion is divided into the following two major sections:

•SJI - This section describes the financial condition and results of operations of SJI and its subsidiaries on a consolidated basis. It includes discussions of our regulated operations, including SJG, and our non-regulated operations.

•SJG - This section describes the financial condition and results of operations of SJG, a subsidiary of SJI and separate registrant, which comprises the SJG utility operations segment.

Both sections of Management's Discussion - SJI and SJG - are designed to provide an understanding of each company's respective operations and financial performance and should be read in conjunction with each other as well as in conjunction with the respective company's condensed consolidated financial statements and the combined Notes to Condensed Consolidated Financial Statements in this Quarterly Report as well as SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Unless otherwise noted, earnings per share amounts are presented on a diluted basis, and are based on weighted average common and common equivalent shares outstanding. SJI's and SJG's operations are seasonal and accordingly, operating results for the interim periods presented are not indicative of the results to be expected for the full fiscal year.

Forward-Looking Statements and Risk Factors — This Quarterly Report, including information incorporated by reference, contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, expected sources of incremental margin, strategy, financing needs, future capital expenditures and the outcome or effect of ongoing litigation, are forward-looking. This Quarterly Report uses words such as "anticipate," "believe," "expect," "estimate," "forecast," "goal," "intend," "objective," "plan," "project," "seek," "strategy," "target," "will" and similar expressions to identify forward-looking statements. These forward-looking statements are based on the beliefs and assumptions of management at the time that these statements were prepared and are inherently uncertain. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These risks and uncertainties include, but are not limited to, general economic conditions on an international, national, state and local level; weather conditions in SJI’s marketing areas; changes in commodity costs; changes in the availability of natural gas; “non-routine” or “extraordinary” disruptions in SJI’s distribution system; regulatory, legislative and court decisions; competition; the availability and cost of capital; costs and effects of legal proceedings and environmental liabilities; the failure of customers, suppliers or business partners to fulfill their contractual obligations; changes in business strategies; and public health crises and epidemics or pandemics, such as a novel coronavirus (COVID-19).

These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements, are described in greater detail under the heading “Item 1A. Risk Factors” in this Quarterly Report, SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and in any other SEC filings made by SJI or SJG during ~~2019~~2020 and ~~2020~~2021 and prior to the filing of this Quarterly Report. No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made. SJI and SJG undertake no obligation to revise or update any forward-looking statements, whether from new information, future events or otherwise, except required by law.

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~~Critical Accounting Policies — Estimates and Assumptions~~COVID-19 ~~— Management must make estimates~~- Except as noted below, the impact of COVID-19 on the financial results of the Company has not been material for the three months ended March 31, 2021 and ~~assumptions that affect~~2020, respectively. For additional information related to COVID-19 and its impacts, see the ~~amounts reported in the condensed consolidated financial statements~~"COVID-19" section of Item 7 "Management Discussion & Analysis of Financial Condition and ~~related disclosures. Actual results could differ from those estimates. Certain types~~Results of ~~transactions presented in our condensed consolidated financial statements require a significant amount~~Operations" of judgment and estimation. These relate to regulatory accounting, derivatives, environmental remediation costs, pension and other postretirement benefit costs, revenue recognition, goodwill, and evaluation of equity method investments for other-than-temporary impairment. A discussion of these estimates and assumptions may be found in SJI's ~~and SJG's~~ Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

~~COVID-19~~- In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic. The rapid spread has resulted in worldwide shutdowns and the halting of business and personal activity as governments around the world imposed regulations to control the spread of COVID-19. As a result, the global economy has been marked by significant slowdowns and uncertainty.

Our business operations continue to function effectively during the pandemic. We are continuously evaluating the global pandemic and are taking necessary steps to mitigate known risks. We continue to closely monitor developments related to the pandemic and will adjust our actions and operations as appropriate in order to continue to provide safe and reliable service to our customers and communities while keeping employees safe. The full impact on the businesses of SJI and SJG from the pandemic, including the regulatory responses, is unknown at this time and difficult to predict as the situation remains fluid. SJI and SJG provide critical and essential services to our customers and the health and safety of our employees and customers is our first priority. SJI and SJG considered the impact of COVID-19 on the use of estimates and assumptions used for financial reporting and noted there were no material impacts on our results of operations for the three and six months ended June 30, 2020, as operations and delivery of product to our customers has not been materially impacted. To date, SJI has not experienced significant reductions in sales volumes across our businesses.

SJI has been actively addressing the COVID-19 pandemic and has established a task force comprised of members of management, with the mission of ensuring the safety of individuals (customers and employees), while continuing to perform our daily responsibilities in an efficient and safe manner. SJI is following the guidance from federal, state and local authorities to help safeguard the health, safety and well-being of its employees. To date, all of our employees are currently working. The task force identified which roles are essential (i.e. need to work in field/office to conduct daily activities) and non-essential (i.e. able to perform work from a remote location) and developed a plan for all employees in non-essential roles to work remotely from home while ensuring that the appropriate safety measures are in place for all employees in essential roles in the field/office. These plans remain in place, as all employees in non-essential roles continue to work remotely despite some states, including New Jersey, easing restrictions. For employees in essential roles, safety measures include additional personal protective equipment and adjusting shifts to reduce the number of workers in close contact. Given the additional safety measures in place, and the ability for employees in non-essential roles to work remotely, we have not had a material impact on our operations as a result of these human capital constraints, and we do not believe operations will be materially impacted going forward by human capital constraints.

In order to initiate the business continuity plan, the Company has incurred operating costs for emergency supplies, cleaning services, enabling technology and other specific needs during the pandemic. SJI has incurred costs during the six months ended June 30, 2020 of $1.4 million, with $0.8 million being recorded as Property, Plant & Equipment on the condensed consolidated balance sheets, and the remaining $0.6 million recorded as Operations Expense on the condensed consolidated statements of income (loss). SJG has recorded $0.2 million of such costs, which are recorded as Property, Plant & Equipment on the condensed balance sheets. Going forward, we expect further expenses for the above mentioned items; however, we do not anticipate these expenses to be material.

The supply chain has not been materially impacted by COVID-19; this is because the Company has a large inventory of standard products such as pipe material. In addition, given that the products are considered essential products, factories are remaining open, therefore allowing materials to be replenished. The Company is actively managing the materials, supplies and contract services necessary for our operations, and does not expect a disruption to the Company's gas supply in the future.

Our infrastructure investment programs to replace and upgrade critical utility infrastructure continue to move forward. As a result of COVID-19, certain construction activity had been delayed due to some activity being ceased in accordance with directives from the Governor of New Jersey. Construction activity has since resumed given the directive from the Governor was lifted. Our infrastructure investment programs continue to move forward and we remain on track to achieve our capital spending projections in 2020; however, to the extent the pandemic worsens or a similar directive is put in place in the future for a long period of time, our capital projects could be significantly impacted.

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We have considered the impact of COVID-19 on the liquidity position of the Company, and note that it has remained stable throughout this uncertain period, and SJI's and SJG's ability to borrow has not been impacted to date. Further, SJI and SJG have successfully paid off and refinanced debt, and raised equity through the ATM offering, during the second quarter of 2020. See Liquidity and Capital resources section for detailed description of borrowings entered into during the period.

As a result of the COVID-19 pandemic and the resulting macroeconomic market conditions, the Company determined it necessary to perform a quantitative goodwill impairment analysis on the goodwill at the ETG reporting unit as of March 31, 2020. There were no impairments recorded as a result of this interim impairment test. During the second quarter of 2020, management did not identify any qualitative factors indicating that it was more likely than not that the fair value of the ETG reporting unit was less than its carrying amount. See "Goodwill" below, along with Note 18 to the condensed consolidated financial statements.

We considered the impact the pandemic has had on operating revenues, noting that SJI and SJG have not seen a significant reduction in revenues as a result of the pandemic. This is due to gas and electricity being considered an essential service and continuing to be delivered timely to customers, and no delays or operational shutdowns taking place to date. Given the performance obligation is satisfied at delivery, which matches the time when the Company is able to invoice the customer, the Company is confident in being able to meet its future performance obligations. To the extent that the pandemic does impact our ability to deliver in the future, operating revenues could be impacted.

All accounts receivables ~~arise from contracts with customers and~~ are carried at the amount owed by customers. The provision for uncollectible accounts is established based on expected credit losses. On July 2, 2020, the BPU issued an Order authorizing New Jersey's regulated utilities to create a COVID-19-related regulatory asset by deferring on their books and records the prudently incurred incremental costs related to COVID-19 beginning on March 9, 2020 and continuing through September 30, 2021, or 60 days after the termination of the public health emergency, whichever is later. The Company ~~will be~~is required to file quarterly reports with the BPU, along with a petition offor recovery of such incremental costs with the BPU by December 31, 2021 or within 60 days of the close of the tracking period, whichever is later. During the ~~second quarter 2020,~~three months ended March 31, 2021, ETG deferred $1.9 million and SJG deferred ~~$9.0~~$2.2 million ~~and $0.7 million, respectively,~~ of incremental costs principally related to expected credit losses from uncollectibles as a result of the COVID-19 pandemic, specifically related to changes in payment patterns observed to date and consideration of macroeconomic factors. We have deemed these costs to be probable of ~~recovery.~~recovery (see Note 8 to the condensed consolidated financial statements). The Utilities have ~~suspended~~continued the suspension of disconnects for nonpayment by our customers, based on ~~orders and requests from our various regulators; these suspensions will continue until further orders are received from our regulators.~~

~~Given the impact that COVID-19 has had on the economy, on March 27, 2020 the President signed into law the CARES Act,~~ an ~~economic stimulus package in response to the COVID-19 global pandemic, as a way to provide relief to both businesses and individuals affected~~executive order issued by the ~~virus. The CARES Act contains several corporate tax provisions that could impact SJI~~Governor of New Jersey, in which water, gas and SJG, including making remaining alternative minimum tax credits immediately refundable, deferring payments on social security taxes for employees, and other employee retention credits. The Company does not currently expectelectricity providers are barred from cutting services to New Jersey residents. On March 3, 2021, the ~~CARES Act, and these provisions,~~Governor of New Jersey signed an executive order to ~~have a material effect on current income tax expense or deferred tax assets/liabilities; however, we are currently evaluating~~extend the ~~overall impact of the CARES Act and note that new or additional changes to regulations in the future could have a material impact.~~

~~Additional information concerning the impact COVID-19 may have upon the Company in the future and results of operations can be found in Part II, Item 1A Risk Factors.~~utility shutoff moratorium through June 30, 2021.

~~Business Combinations~~Critical Accounting Policies — Estimates and Assumptions - On August 31, 2019, SJI, through its wholly-owned subsidiary SJEI, completed its acquisition of AEP. On June 30, 2020, SJI, through its wholly-owned subsidiary Marina, acquired ESNJ-AL-Somerspoint LLC, ESNJ-AL-Hamiltonsquare LLC,— Management must make estimates and ~~ESNJ-AL-BrownsMills LLC, which own and operate solar-generation sites. See detailed discussions concerning these acquisitions and their impact on SJI, including~~assumptions that affect the ~~accounting for business combinations,~~amounts reported in ~~Note 17 to~~ the condensed consolidated financial ~~statements.~~

~~New Accounting Pronouncements— See detailed discussions concerning New Accounting Pronouncements~~statements and ~~their impact on SJI and SJG~~related disclosures. Actual results could differ from those estimates. Certain types of transactions presented in ~~Note 1 to the~~our condensed consolidated financial ~~statements.~~statements require a significant amount of judgment and estimation. These relate to regulatory accounting, derivatives, environmental remediation costs, pension and other postretirement benefit costs, revenue recognition, goodwill, income taxes and evaluation of equity method investments for other-than-temporary impairment. A discussion of these estimates and assumptions may be found in Item 7 in SJI's and SJG's Annual Report on Form 10-K for the year ended December 31, 2020.

Regulatory Actions — Other than the changes discussed in Note 7 to the condensed consolidated financial statements, there have been no significant regulatory actions since ~~December 31, 2019. See detailed discussion concerning Regulatory Actions~~those discussed in Note 10 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

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~~Environmental Remediation~~— There have been no significant changes to the status of SJI’s and SJG's environmental remediation efforts since December 31, 2019. See detailed discussion concerning Environmental Remediation Costs in Note 15 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2019.

~~Impairment of Long-Lived Assets~~ — Long-lived assets that are held and used are reviewed for impairment whenever events or changes in circumstances, such as significant adverse changes in regulation, business climate or market conditions, indicate carrying values may not be recoverable. Such reviews are performed in accordance with ASC 360. An impairment loss is indicated if the total future estimated undiscounted cash flows expected from an asset are less than its carrying value. An impairment charge is measured by the difference between an asset's carrying amount and fair value with the difference recorded within Impairment Charges on the condensed consolidated statements of income (loss). Fair values can be determined by a variety of valuation methods, including third-party appraisals, sales prices of similar assets, and present value techniques. SJI and SJG determine the fair values by using an income approach by applying a discounted cash flow methodology to the future estimated cash flows, and include key inputs such as forecasted revenues, operating expenses and discount rates. No impairments were identified at either SJI or SJG for the three and six months ended June 30, 2020 or 2019, respectively. See Note 1 to the condensed consolidated financial statements.2020.

Goodwill - See discussion on Goodwill in Note 1817 to the condensed consolidated financial statements, along with Note 21 to the Consolidated Financial Statements in Item 8 of SJI’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

As discussed in Note 1817 to the condensed consolidated financial statements, SJI monitors all relevant events and circumstances during the year to determine if an interim impairment test is required. Such events and circumstances include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, company specific operating results and other relevant entity-specific events affecting individual reporting units. ~~Subsequent to December 31, 2019, certain qualitative factors were present~~The Company determined that, required the Company to perform a quantitative assessment for goodwill impairment at March 31, 2020 related to the ETG reporting unit. The qualitative factors primarily included macroeconomic conditions related to COVID-19. No impairment was recorded as a result of this interim impairment test. During the second quarter of 2020, management did not identify any qualitative factors indicating that it was more likely than not that the fair value of the ETG reporting unit was less than its carrying amount.

~~In preparing the goodwill impairment tests~~ as of March 31, ~~2020 and December 31, 2019, the fair value~~2021, there were not indicators of impairment of the goodwill associated with its reporting ~~unit was calculated using~~units, and as such did not perform a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include, but are not limited to, forecasts of future operating results capital expenditures, tax rates, and projected terminal values and assumptions related to discount and growth rates and implied market multiples for a selected group of peer companies. Based on the analysis, the fair value of the ETG reporting unit closely approached, but exceeded, its carrying amount.quantitative analysis. Should economic conditions deteriorate in future periods or ~~remain~~become depressed for a prolonged period of time, estimates of future cash flows and market valuation assumptions may not be sufficient to support the carrying value of goodwill, requiring impairment charges in the future.

Evaluation of Equity Method Investments for Other-Than-Temporary Impairment - Our evaluation of impairment of equity method investments when conditions exist that could indicate that the fair value of the investment is less than book value includes key inputs that involve significant management judgments and estimates, including projections of the investment's cash flows, selection of a discount rate and probability weighting of potential outcomes of legal proceedings and other available options. Our evaluation also considered the current economic conditions as a result of COVID-19, noting that the timelines, potential options and legal proceedings have not been impacted. However, the legal proceedings could have unfavorable outcomes, or there could be other future unfavorable developments, such as a reduced likelihood of success from development options and legal outcomes, estimated increases in construction costs, increases in the discount rate, or further significant delays, or PennEast could conclude that the project is not viable or does not go forward as actions progress.

These could impact our conclusions with respect to other-than-temporary impairment and may require that we recognize an impairment charge of up to our recorded investment in the project, net of any cash and working capital.

See ~~detailed~~ discussion in Note 3 to the condensed consolidated financial statements, along with Note 3 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020 related to our investment in PennEast. At March 31, 2021, the Company evaluated its investment in PennEast for impairment and determined there is not a triggering event for other-than-temporary impairment, and has not recorded any impairment charge to reduce the carrying value of our investment. Our evaluation considered that the pending legal and regulatory proceedings are ongoing, and the intent is to move forward with all potential legal and regulatory proceedings and other options available. Our evaluation also considered the current economic conditions as a result of COVID-19, noting that the timelines, potential options and legal and regulatory proceedings have not been impacted. However, the legal and regulatory proceedings could have unfavorable outcomes, or there could be other future unfavorable developments, such as a reduced likelihood of success from development options and legal and regulatory outcomes, estimated increases in construction costs, increases in the discount rate, or further

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significant delays, or PennEast could conclude that the project is not viable or does not go forward as actions progress. These could impact our conclusions with respect to other-than-temporary impairment and may require that we recognize an impairment charge of up to our recorded investment in the project, net of any cash and working capital.

New Accounting Pronouncements— See discussions concerning New Accounting Pronouncements and their impact on SJI and SJG in Note 1 to the condensed consolidated financial statements.

Operating Segments:

~~SJI operates~~Beginning with the first quarter of 2021, our internal management reporting, specifically around our nonutility businesses, changed primarily due to recent acquisitions and divestitures, and new product lines entered into as a result. These were primarily within the fuel cell, solar, RNG, and retail businesses. As a result of these changes in ~~several different reportable~~our businesses, the Company realigned its operating segments. ~~These~~The realigned segments reflect the financial information regularly evaluated by the CODM, which for SJI is the Company's Chief Executive Officer. The operating segments are as follows:

•SJG utility operations consist primarily of natural gas distribution to residential, commercial and industrial customers in southern New Jersey.

▪•ETG utility operations consist of natural gas distribution to residential, commercial and industrial customers in northern and central New Jersey.

•ELK utility operations consist of natural gas distribution to residential, commercial and industrial customers in Maryland. ~~As discussed in Note 20 to the condensed consolidated financial statements, on~~On July 31, 2020, SJI ~~closed on its transaction to sell~~sold ELK to a third-party buyer.

•Wholesale energy operations include the activities of SJRG and SJEX.

•Retail services operations includes the activities of SJE, SJESP and SJEI, as well as our equity interest in Millennium.

•~~Retail electric operations at SJE consist of electricity acquisition and transportation to commercial, industrial and residential customers.~~Renewables consists of:

◦The Catamaran joint venture, which owns Annadale.

•◦~~On-site energy production consists of MTF~~Solar-generation sites located in New Jersey, and ~~ACB, which as discussed in Note 1 to the condensed consolidated financial statements, were sold on February 18, 2020. This segment also includes other energy-related projects, including~~ three legacy solar projects, one of which was sold during the ~~three months ended March 31, 2020 as discussed in Note 1 to the condensed consolidated financial statements. Also included in this segment are the~~first quarter of 2020.

◦The activities of ACLE, BCLE, SCLE and SXLE. Operations at BCLE, SCLE, and SXLE ceased during the second quarter of ~~2020 as discussed~~2020.

◦MTF and ACB, which were sold in ~~Note 1 to~~the first quarter of 2020.

•Decarbonization consists of

◦SJI Renewables Energy Ventures, LLC, which includes our equity interest in REV, which is included in Equity in Earnings of Affiliated Companies on the condensed consolidated ~~financial statements. As~~statements of ~~June 30, 2020, on-site energy production also includes ESNJ-AL-Somerspoint LLC, ESNJ-AL-Hamiltonsquare LLC, and ESNJ-AL-BrownsMills~~income.

◦SJI RNG Devco, LLC, which includes the renewable natural gas development rights in certain dairy farms; there are ~~newly acquired entities which own and operate solar-generation sites located in New Jersey. See Note 17 to the condensed consolidated financial statements.~~

•~~Appliance service operations includes SJESP, which receives commissions on service contracts~~no operating results from ~~a third party.~~

this entity at this time.

PennEast.

•Intersegment represents intercompany transactions among the above SJI consolidated entities.

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SOUTH JERSEY INDUSTRIES, INC.

RESULTS OF OPERATIONS:

Summary:

SJI's net income for the three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$10.8~~$27.7 million to ~~a net loss of $2.6~~$128.7 million compared with the same period in ~~2019.~~2020. SJI's income from continuing operations for the three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$10.7~~$27.7 million to ~~a net loss of $2.6~~$128.8 million compared with the same period in ~~2019.~~2020. The significant drivers for the overall change were as follows (all numbers in the bullet points below are presented after-tax):

•The income contribution from ~~the wholesale energy~~gas utility operations at ~~SJRG~~SJG for the three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$6.0~~$13.1 million to ~~$4.7~~$83.6 million compared with the same period in ~~2019,~~2020, primarily due to favorable changes in base rates resulting from the completion of SJG's rate case in September 2020, along with customer growth.

•The income contribution from the wholesale energy operating segment for the three months ended March 31, 2021 increased $7.6 million to $13.0 million compared with the same period in 2020, primarily due to higher margins on daily energy trading activities as well as colder weather experienced in the first quarter of 2021.

•There was an income contribution of $4.0 million related to an unrealized loss recorded on interest rate derivative contracts during the first quarter of 2020 that did not recur in 2021 as these contracts were terminated during the fourth quarter of 2020.

•The income contribution from the renewables operating segment for the three months ended March 31, 2021 increased $2.1 million to $1.0 million compared with the same period in 2020, primarily due to the results from the fuel cell project at Annadale, which was placed into service during the fourth quarter of 2020, along with ~~a refund received from a third party supplier as discussed in Note 1~~reduced operations and maintenance expenses due to the ~~condensed consolidated financial statements. This was partially offset with the change~~sale of MTF and ACB in ~~unrealized gains and losses on forward financial contracts due to price volatility.~~2020.

•The income contribution from the gas utility operations at ETG for the three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$3.1~~$1.3 million to ~~a loss of $0.8~~$38.0 million compared with the same period in ~~2019,~~2020, primarily due to ~~positive margins due to favorable changes in base rates resulting from the completion of ETG's rate case in November 2019, along with~~ customer ~~growth and lower maintenance expenses.~~growth. This was partially offset with higher operations, maintenance and depreciation expenses.

•The income contribution from gas utility operations at SJG for the three months ended June 30, 2020 increased $1.7 million to $3.7 million compared with the same period in 2019, primarily due to customer growth and the roll-in to rates of infrastructure program investments. Also contributing was higher investment performance and higher AFUDC income. These were partially offset with increases in depreciation and maintenance expenses.

SJI's net income for the six months ended June 30, 2020 increased $26.2 million to $98.4 million compared with the same period in 2019. SJI's income from continuing operations for the six months ended June 30, 2020 increased $26.1 million to $98.5 million compared with the same period in 2019. The significant drivers for the overall change were as follows (all numbers in the bullet points below are presented after-tax):

•The income contribution from the wholesale energy operations at SJRG for the six months ended June 30, 2020 increased $12.9 million to $10.1 million compared with the same period in 2019, primarily due to higher margins on daily energy trading activities, along with a refund received from a third party supplier as discussed in Note 1 to the condensed consolidated financial statements. Also contributing to the increase was the change in unrealized gains and losses on forward financial contracts due to price volatility.

•The income contribution from the gas utility operations at ETG for the six months ended June 30, 2020 increased $9.0 million to $35.9 million compared with the same period in 2019, primarily due to positive margins due to favorable changes in base rates resulting from the completion of ETG's rate case in November 2019, along with customer growth and lower maintenance expenses. This was partially offset with higher operations and depreciation expenses.

•The income contribution from gas utility operations at SJG for the six months ended June 30, 2020 increased $3.5 million to $74.2 million compared with the same period in 2019, primarily due to customer growth and the roll-in to rates of infrastructure program investments. SJG's utility margin increased from its CIP mechanism as discussed in "Utility Margin - SJG Utility Operations" below. These were partially offset with increases in depreciation and maintenance expenses, along with a one-time tax adjustment resulting from SJG's Stipulation of Settlement with the BPU as part of its recent rate case filing (see Note 7 to the condensed consolidated financial statements).

A significant portion of the volatility in operating results is due to the impact of the accounting methods associated with SJI’s derivative activities. SJI uses derivatives to limit its exposure to market risk on transactions to buy, sell, transport and store natural gas and to buy and sell retail electricity. SJI also ~~uses~~previously used derivatives to limit its exposure to increasing interest rates on variable-rate debt.

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The types of transactions that typically cause the most significant volatility in operating results are as follows:

•~~The wholesale energy operations at~~ SJRG purchases and holds natural gas in storage and maintains capacity on interstate pipelines to earn profit margins in the future. ~~The wholesale energy operations utilize~~SJRG utilizes derivatives to mitigate price risk in order to substantially lock-in the profit margin that will ultimately be realized. However, both gas stored in inventory and pipeline capacity are not considered derivatives and are not subject to fair value accounting. Conversely, the derivatives used to reduce the risk associated with a change in the value of inventory and pipeline capacity are accounted for at fair value, with changes in fair value recorded in operating results in the period of change. As a result, earnings are subject to volatility as the market price of derivatives change, even when the underlying hedged value of inventory and pipeline capacity are unchanged. Additionally, volatility in earnings is created when realized gains and losses on derivatives used to mitigate commodity price risk on expected future purchases of gas injected into storage are recognized in earnings when the derivatives settle, but the cost of the related gas in storage is not recognized in earnings until the period of withdrawal. This volatility can be significant from period to period. Over time, gains or losses on the sale of gas in storage, as well as use of capacity, will be offset by losses or gains on the derivatives, resulting in the realization of the profit margin expected when the transactions were initiated.

•~~The retail electric operations at~~ SJE ~~use~~uses forward contracts to mitigate commodity price risk on fixed price electric contracts with customers. In accordance with GAAP, the forward contracts are recorded at fair value, with changes in fair value recorded in earnings in the period of change. Several related customer contracts are not considered derivatives and, therefore, are not recorded in earnings until the electricity is delivered. As a result, earnings are subject

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to volatility as the market price of the forward contracts change, even when the underlying hedged value of the customer contract is unchanged. Over time, gains or losses on the sale of the fixed price electric under contract will be offset by losses or gains on the forward contracts, resulting in the realization of the profit margin expected when the transactions were initiated.

As a result, management also uses the non-GAAP financial measures of Economic Earnings and Economic Earnings per share when evaluating its results of operations. These non-GAAP financial measures should not be considered as an alternative to GAAP measures, such as net income, operating income, earnings per share from continuing operations or any other GAAP measure of financial performance.

We define Economic Earnings as: Income from ~~continuing operations,~~Continuing Operations, (i) less the change in unrealized gains and plus the change in unrealized losses on non-utility derivative transactions; (ii) less income and ~~(ii)~~plus losses attributable to noncontrolling interest; and (iii) less the impact of transactions, contractual arrangements or other events where management believes period to period comparisons of SJI's operations could be difficult or potentially confusing. With respect to part ~~(ii)~~(iii) of the definition of Economic Earnings, ~~several~~ items ~~are~~ excluded from Economic Earnings for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, and 2019, consisting of the impact of pricing disputes with third parties, costs to acquire ETG and ELK, costs to prepare to exit the TSA, costs incurred and gains recognized on sales of solar, MTF/ACB, and ELK, costs incurred to cease operations at three landfill gas-to-energy-production facilities, severance and other employee separation costs, and a one-time tax adjustment resulting from SJG's Stipulation of Settlement with the BPU. Seeare described in (A)-~~(E)~~(D) in the table below.

Economic Earnings is a significant financial measure used by our management to indicate the amount and timing of income from continuing operations that we expect to earn after taking into account the impact of derivative instruments on the related transactions, as well as the impact of contractual arrangements and other events that management believes make period to period comparisons of SJI's operations difficult or potentially confusing. Management uses Economic Earnings to manage its business and to determine such items as incentive/compensation arrangements and allocation of resources. Specifically regarding derivatives, we believe that this financial measure indicates to investors the profitability of the entire derivative-related transaction and not just the portion that is subject to mark-to-market valuation under GAAP. We believe that considering only the change in market value on the derivative side of the transaction can produce a false sense as to the ultimate profitability of the total transaction as no change in value is reflected for the non-derivative portion of the transaction.

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Economic Earnings for the three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$11.4~~$22.1 million to ~~a loss of $0.9~~$128.9 million compared with the same period in ~~2019. The significant drivers for the overall change were as follows (all numbers in the bullet points below are presented after-tax):~~

•The Economic Earnings contribution from the wholesale energy operations at SJRG for the three months ended June 30, 2020 increased $7.7 million to $5.7 million compared with the same period in 2019, primarily due to higher margins on daily energy trading activities, along with a refund received from a third party supplier as discussed in Note 1 to the condensed consolidated financial statements.

•The Economic Earnings contribution from gas utility operations at ETG for the three months ended June 30, 2020 increased $3.1 million to a loss of $0.8 million compared with the same period in 2019, primarily due to positive margins due to favorable changes in base rates resulting from the completion of ETG's rate case in November 2019, along with customer growth and lower maintenance expenses. This was partially offset with higher operations and depreciation expenses.

•The Economic Earnings contribution from gas utility operations at SJG for the three months ended June 30, 2020 increased $1.7 million to $3.7 million compared with the same period in 2019, primarily due to customer growth and the roll-in to rates of infrastructure program investments. Also contributing was higher investment performance and higher AFUDC income. These were partially offset with increases in depreciation and maintenance expenses.

~~Economic Earnings for the six months ended June 30, 2020 increased $18.8 million to $106.0 million compared with the same period in 2019.~~2020. The significant drivers for the overall change were as follows (all numbers in the bullet points below are presented after-tax):

•The Economic Earnings contribution from gas utility operations at ~~ETG~~SJG for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$9.0~~$11.9 million to ~~$35.9~~$83.6 million compared with the same period in ~~2019,~~2020, primarily ~~due to positive margins~~ due to favorable changes in base rates resulting from the completion of ~~ETG's~~SJG's rate case in ~~November 2019,~~September 2020, along with customer ~~growth and lower maintenance expenses. This was partially offset with higher operations and depreciation expenses.~~growth.

•The Economic Earnings contribution from the wholesale energy ~~operations at SJRG~~operating segment for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$5.8~~$7.9 million to ~~$11.0~~$13.2 million compared with the same period in ~~2019,~~2020, primarily due to higher margins on daily energy trading activities as well as colder weather experienced in the first quarter of 2021.

•The Economic Earnings contribution from the renewables operating segment for the three months ended March 31, 2021 increased $1.3 million to $0.6 million compared with the same period in 2020, primarily due to the results from the fuel cell project at Annadale, which was placed into service during the fourth quarter of 2020, along with ~~a refund received from a third party supplier as discussed in Note 1~~reduced operations and maintenance expenses due to the ~~condensed consolidated financial statements.~~sale of MTF and ACB in 2020.

•The Economic Earnings contribution from gas utility operations at ~~SJG~~ETG for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$4.7~~$1.3 million to ~~$75.4~~$38.0 million compared with the same period in ~~2019,~~2020, primarily due to customer ~~growth and the roll-in to rates of infrastructure program investments. SJG's utility margin increased from its CIP mechanism as discussed in "Utility Margin - SJG Utility Operations" below. These were~~growth. This was partially offset with ~~increases in~~higher operations, maintenance and depreciation ~~and maintenance~~ expenses.

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The following table presents a reconciliation of SJI's income from continuing operations and earnings per share from continuing operations to Economic Earnings and Economic Earnings per share for the three ~~and six~~ months ended ~~June 30~~March 31 (in thousands, except per share data):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
(Loss) Income from Continuing Operations $ (2,578) $ (13,304) $ 98,522 $ 72,395
Minus/Plus:
Unrealized Mark-to-Market Losses on Derivatives 1,621 1,888 5,943 15,038
Net Losses from a Legal Proceeding in a Pricing Dispute (A) — 986 — 1,977
Acquisition/Sale Net Costs (Gains) (B) 92 (1,822) 1,453 163
Other Costs (C) 617 422 764 2,995
  Income Taxes (D) (615) (391) (1,920) (5,352)
  Additional Tax Adjustments (E) — — 1,214 —
Economic Earnings $ (863) $ (12,221) $ 105,976 $ 87,216
(Loss) Earnings per Share from Continuing Operations $ (0.03) $ (0.14) $ 1.06 $ 0.79
Minus/Plus:
Unrealized Mark-to-Market Losses on Derivatives 0.02 0.02 0.06 0.16
Net Losses from a Legal Proceeding in a Pricing Dispute (A) — 0.01 — 0.02
Acquisition/Sale Net Costs (Gains) (B) — (0.02) 0.02 0.01
Other Costs (C) 0.01 0.01 0.01 0.03
  Income Taxes (D) (0.01) (0.01) (0.02) (0.06)
  Additional Tax Adjustments (E) — — 0.01 —
Economic Earnings per Share $ (0.01) $ (0.13) $ 1.14 $ 0.95


	Three Months Ended March 31,
	2021		2020
Income from Continuing Operations	$	128,798	$	101,100
Minus/Plus:
Unrealized Mark-to-Market Losses on Derivatives	44		4,322
Income Attributable to Noncontrolling Interest	(129)		—

Acquisition/Sale Net Costs (A)	267		1,361
Other Costs (B)	—		147
Income Taxes (C)	(86)		(1,305)
Additional Tax Adjustments (D)	—		1,214
Economic Earnings	$	128,894	$	106,839

Earnings per Share from Continuing Operations	$	1.26	$	1.09
Minus/Plus:
Unrealized Mark-to-Market Losses on Derivatives	—		0.05

Acquisition/Sale Net Costs (A)	—		0.01

Income Taxes (C)	—		(0.01)
Additional Tax Adjustments (D)	—		0.01
Economic Earnings per Share	$	1.26	$	1.15

The following table presents a reconciliation of SJG's income from continuing operations to Economic Earnings for the three ~~and six~~ months ended ~~June 30~~March 31 (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Income from Continuing Operations	Income from Continuing Operations	$	3,678	$	1,976	$	74,200	$	70,707	Income from Continuing Operations	$	83,618	$	70,522
Plus:	Plus:									Plus:
Additional Tax Adjustments ~~(E)~~(D)	Additional Tax Adjustments ~~(E)~~(D)	—		—		1,214		—		Additional Tax Adjustments ~~(E)~~(D)	—		1,214
Economic Earnings	Economic Earnings	$	3,678	$	1,976	$	75,414	$	70,707	Economic Earnings	$	83,618	$	71,736

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The ~~effect~~reconciliation of derivative instruments not designated as hedging instruments under GAAP in the condensed consolidated statements of income ~~(loss)~~ (see Note 12 to the condensed consolidated financial statements), ~~as compared to~~and the Economic Earnings table above, is as follows (in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Losses on Energy Related Commodity Contracts $ (1,285) $ (143) $ (1,561) $ (12,203)
Losses on Interest Rate Contracts (336) (1,745) (4,382) (2,835)
Total unrealized mark-to-market losses on derivatives (1,621) (1,888) (5,943) (15,038)
Net Losses from a Legal Proceeding in a Pricing Dispute (A) — (986) — (1,977)
Acquisition/Sale Net (Costs) Gains (B) (92) 1,822 (1,453) (163)
Other Costs (C) (617) (422) (764) (2,995)
Income Taxes (D) 615 391 1,920 5,352
Additional Tax Adjustments (E) — — (1,214) —
Total reconciling items between (losses) income from continuing operations and economic earnings $ (1,715) $ (1,083) $ (7,454) $ (14,821)


	Three Months Ended March 31,
	2021		2020
Losses on Energy Related Commodity Contracts	$	(44)	$	(276)
Losses on Interest Rate Contracts	—		(4,046)
Total unrealized mark-to-market (losses)/gains on derivatives	(44)		(4,322)
Income Attributable to Noncontrolling Interest	129		—
Acquisition/Sale Net Costs (A)	(267)		(1,361)
Other Costs (B)	—		(147)
Income Taxes (C)	86		1,305
Additional Tax Adjustments (D)	—		(1,214)
Total reconciling items between losses from continuing operations and economic earnings	$	(96)	$	(5,739)

(A) Represents ~~net losses, including interest, legal fees, and~~ the ~~realized difference in~~final working capital payment on the ~~market value~~sale of ELK, which was finalized during the ~~commodity (including financial hedges), resulting from a ruling in a legal proceeding related to a pricing dispute between SJI and a gas supplier that began in October 2014.~~

~~(B) Represents~~three months ended March 31, 2021. Also represents items recognized during the three months ended March 31, 2020 such as costs incurred to prepare to exit the ~~TSA. Also included here are~~TSA, and gains/losses recognized and costs incurred on the sale of ~~certain~~ solar assets ~~included in Assets Held for Sale in previous periods~~ as well as MTF/~~ACB~~ACB.

(B) Represents severance and ~~ELK, and~~other employee separation costs, along with costs incurred to cease operations at three landfill gas-to-energy production facilities.

~~(D)~~ The income taxes ~~on (A) through (C) above~~ were determined using a combined average statutory tax ~~rate for the three and six months ended June 30, 2020 and 2019.~~rate.

~~(E)~~(D) Represents a one-time tax adjustment in 2020 resulting from ~~SJG's Stipulation~~the BPU's approval of ~~Settlement with the BPU, as part of its recent rate case filing.~~a stipulation for SJG.

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SJI Utilities:

SJG Utility Operations:

The following tables summarize the composition of SJG utility operations operating revenues and margin for the three ~~and six~~ months ended ~~June 30~~March 31 (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Utility Operating Revenues:	Utility Operating Revenues:									Utility Operating Revenues:
Firm Sales -	Firm Sales -									Firm Sales -
Residential	Residential	$	56,496	$	27,139	$	216,403	$	207,105	Residential	$	161,102	$	159,907
Commercial	Commercial	10,967		9,721		43,522		46,415		Commercial	32,109		32,555
Industrial	Industrial	332		603		1,579		2,535		Industrial	1,601		1,247
Cogeneration & Electric Generation	Cogeneration & Electric Generation	586		391		1,040		971		Cogeneration & Electric Generation	509		454
Firm Transportation -	Firm Transportation -									Firm Transportation -
Residential	Residential	1,588		1,540		5,941		6,528		Residential	4,899		4,353
Commercial	Commercial	5,942		6,715		21,377		21,953		Commercial	17,190		15,435
Industrial	Industrial	5,851		5,653		12,264		12,250		Industrial	7,350		6,413
Cogeneration & Electric Generation	Cogeneration & Electric Generation	1,088		1,241		2,515		2,969		Cogeneration & Electric Generation	1,379		1,427

Total Firm Revenues	Total Firm Revenues	82,850		53,003		304,641		300,726		Total Firm Revenues	226,139		221,791

Interruptible Sales	Interruptible Sales	1		—		15		62		Interruptible Sales	73		14
Interruptible Transportation	Interruptible Transportation	274		260		616		640		Interruptible Transportation	444		342
Off-System Sales	Off-System Sales	3,130		7,119		19,534		29,546		Off-System Sales	23,290		16,404
Capacity Release	Capacity Release	750		1,575		2,690		2,951		Capacity Release	1,209		1,940
Other	Other	177		311		380		541		Other	244		203
		87,182		62,268		327,876		334,466			251,399		240,694
Less: Intercompany Sales	Less: Intercompany Sales	(568)		(1,247)		(1,657)		(2,647)		Less: Intercompany Sales	(6,329)		(1,089)
Total Utility Operating Revenues	Total Utility Operating Revenues	86,614		61,021		326,219		331,819		Total Utility Operating Revenues	245,070		239,605
Less:	Less:									Less:
Cost of Sales - Utility	Cost of Sales - Utility	25,546		2,654		106,080		121,534		Cost of Sales - Utility	74,537		80,534
Less: Intercompany Cost of Sales	Less: Intercompany Cost of Sales	(568)		(1,247)		(1,657)		(2,647)		Less: Intercompany Cost of Sales	(6,329)		(1,089)
Total Cost of Sales - Utility (Excluding Depreciation & Amortization) (A)	Total Cost of Sales - Utility (Excluding Depreciation & Amortization) (A)	24,978		1,407		104,423		118,887		Total Cost of Sales - Utility (Excluding Depreciation & Amortization) (A)	68,208		79,445
Less: Depreciation & Amortization (A)	Less: Depreciation & Amortization (A)	25,201		22,918		50,082		45,460		Less: Depreciation & Amortization (A)	29,315		24,892
Total GAAP Gross Margin	Total GAAP Gross Margin	36,435		36,696		171,714		167,472		Total GAAP Gross Margin	147,547		135,268
Add: Depreciation & Amortization (A)	Add: Depreciation & Amortization (A)	25,201		22,918		50,082		45,460		Add: Depreciation & Amortization (A)	29,315		24,892
Less: Conservation Recoveries (B)	Less: Conservation Recoveries (B)	1,990		2,560		6,875		9,358		Less: Conservation Recoveries (B)	4,238		4,885
Less: RAC Recoveries (B)	Less: RAC Recoveries (B)	6,233		5,219		12,466		10,438		Less: RAC Recoveries (B)	6,965		6,233
Less: EET Recoveries (B)	Less: EET Recoveries (B)	1,185		650		2,364		1,146		Less: EET Recoveries (B)	1,166		1,179
Less: Revenue Taxes	Less: Revenue Taxes	191		204		736		880		Less: Revenue Taxes	512		545
Utility Margin (C)	Utility Margin (C)	$	52,037	$	50,981	$	199,355	$	191,110	Utility Margin (C)	$	163,981	$	147,318

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		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Utility Margin:	Utility Margin:									Utility Margin:
Residential	Residential	$	36,770	$	27,945	$	119,867	$	126,812	Residential	$	119,974	$	83,099
Commercial and Industrial	Commercial and Industrial	15,645		15,574		47,076		51,822		Commercial and Industrial	41,022		31,431
Cogeneration and Electric Generation	Cogeneration and Electric Generation	1,071		1,064		2,351		2,268		Cogeneration and Electric Generation	1,249		1,280
Interruptible	Interruptible	7		19		33		43		Interruptible	65		26
Off-System Sales & Capacity Release	Off-System Sales & Capacity Release	172		515		957		2,186		Off-System Sales & Capacity Release	737		785
Other Revenues	Other Revenues	458		538		661		787		Other Revenues	243		203
Margin Before Weather Normalization & Decoupling	Margin Before Weather Normalization & Decoupling	54,123		45,655		170,945		183,918		Margin Before Weather Normalization & Decoupling	163,290		116,824
CIP Mechanism	CIP Mechanism	(3,548)		4,382		25,363		5,256		CIP Mechanism	(763)		28,910
EET Mechanism	EET Mechanism	1,462		944		3,047		1,936		EET Mechanism	1,454		1,584
Utility Margin (C)	Utility Margin (C)	$	52,037	$	50,981	$	199,355	$	191,110	Utility Margin (C)	$	163,981	$	147,318

(A) Does not include amortization of debt issuance costs that are recorded as Interest Charges on the condensed consolidated statements of ~~income (loss).~~income.

(B) Represents pass-through expenses for which there is a corresponding credit in operating revenues. Therefore, such recoveries have no impact on SJG's financial results.

(C) Utility Margin is a non-GAAP financial measure and is further defined under the caption "Utility Margin - SJG Utility Operations" below.

Operating Revenues - SJG Utility Operations

Revenues from the gas utility operations at SJG increased ~~$24.9~~$10.7 million, or ~~40.0%~~4.4%, for the three months ended ~~June 30, 2020~~March 31, 2021 compared with the same period in ~~2019.~~2020. Excluding intercompany transactions, revenues increased ~~$25.6~~$5.5 million, or ~~41.9%~~2.3%, for the three months ended ~~June 30, 2020~~March 31, 2021 compared with the same period in ~~2019.~~2020. The significant drivers for the overall change were as follows:

•Total firm revenue increased ~~$29.8~~$4.3 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared with the same period in ~~2019,~~2020, primarily due to higher base rates effective October 1, 2020, along with customer growth, ~~a higher BGSS refund~~partially offset with decreased revenue related to ~~customers in 2019 compared to 2020, and colder weather during the second quarter of 2020.~~SJG's BGSS. While changes in gas costs and BGSS recoveries/refunds fluctuate from period to period, SJG does not profit from the sale of the commodity. Therefore, corresponding fluctuations in Operating Revenue or Cost of Sales have no impact on profitability, as further discussed below under the caption "Utility Margin."

•~~Partially offsetting these increases was~~In addition, OSS ~~which decreased $4.0~~increased $6.9 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared with the same period in ~~2019,~~2020, primarily due to ~~decreased commodity costs as~~colder weather during the first quarter of 2021. During February 2021, SJG's service territory experienced a ~~result of lower cash market~~polar vortex, pushing gas prices to high levels and ~~lower demand.~~creating sales opportunities for SJG. However, the impact of changes in OSS activity does not have a material impact on the earnings of SJG, as SJG is required to return 93% of the profits of such activity to its ratepayers. Earnings from OSS can be seen in the “Margin” table ~~above.~~

Revenues from the gas utility operations at SJG decreased $6.6 million, or 2.0%, for the six months ended June 30, 2020 compared with the same period in 2019. Excluding intercompany transactions, revenues decreased $5.6 million, or 1.7%, for the six months ended June 30, 2020 compared with the same period in 2019. The significant drivers for the overall change were as follows:

•Total OSS decreased $10.0 million for the six months ended June 30, 2020 compared with the same period in 2019 primarily due to lower commodity costs as a result of lower cash market prices and lower demand, along with warmer weather during the first quarter of 2020. However, the impact of changes in OSS do not have a material impact on the earnings of SJG as discussed above.

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•Partially offsetting these decreases was firm revenue, which increased $3.9 million for the six months ended June 30, 2020 compared with the same period in 2019 primarily due to customer growth and a higher BGSS refund to customers in 2019 compared to 2020. Partially offsetting this increase was warmer weather during the first quarter of 2020. SJG does not profit from the sale of the commodity as discussed above.

Utility Margin - SJG Utility Operations

Management uses Utility Margin, a non-GAAP financial measure, when evaluating the operating results of SJG. Utility Margin is defined as natural gas revenues plus depreciation and amortization expenses, less natural gas costs, regulatory rider expenses and related volumetric and revenue-based energy taxes. Management believes that Utility Margin provides a more meaningful basis for evaluating utility operations than revenues since natural gas costs, regulatory rider expenses and related energy taxes are passed through to customers, and since depreciation and amortization expenses are considered to be administrative. Natural gas costs are charged to operating expenses on the basis of therm sales at the prices approved by the BPU through SJG’s BGSS clause. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measure.

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Total Utility Margin increased ~~$1.1~~$16.7 million, or ~~2.1%, and $8.2 million, or 4.3%~~11.3%, for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019.~~2020. The increase is primarily due to favorable changes in base rates resulting from the completion of SJG's rate case in September 2020, along with customer ~~growth and the roll-in~~growth. The decrease in revenues from SJG's BGSS clause had no impact to ~~rates of infrastructure program investments. Also contributing to~~SJG's Utility Margin as discussed under "Operating Revenues - SJG Utility Operations" above. Partially offsetting SJG's Utility Margin is the CIP tracking mechanism, which adjusts earnings when actual usage per customer experienced during the period varies from an established baseline usage per customer. As reflected in the Utility Margin table above and the CIP table in SJG's Management Discussion section, changes year over year to the CIP mechanism are primarily due to variation in customer usage compared to the same period in ~~2019. Partially offsetting the six month comparative period increases is warmer weather in the first three months of 2020 compared to the same period in the prior year.~~2020.

ETG Utility Operations:

The following tables summarize the composition of regulated natural gas utility operations, operating revenues and margin at ETG for the three ~~and six~~ months ended ~~June 30~~March 31 (in ~~thousands, except for degree day data).~~thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Utility Operating Revenues:	Utility Operating Revenues:									Utility Operating Revenues:
Firm & Interruptible Sales -	Firm & Interruptible Sales -									Firm & Interruptible Sales -
Residential	Residential	$	37,480	$	27,134	$	136,876	$	123,393	Residential	$	106,208	$	99,396
Commercial & Industrial	Commercial & Industrial	10,088		8,470		36,373		37,445		Commercial & Industrial	33,377		26,284
Firm & Interruptible Transportation -	Firm & Interruptible Transportation -									Firm & Interruptible Transportation -
Residential	Residential	402		284		1,272		996		Residential	1,032		870
Commercial & Industrial	Commercial & Industrial	9,750		7,438		23,509		19,020		Commercial & Industrial	16,756		13,758
Other	Other	123		1,528		3,970		4,174		Other	173		3,849
Total Firm & Interruptible Revenues	Total Firm & Interruptible Revenues	57,843		44,854		202,000		185,028		Total Firm & Interruptible Revenues	157,546		144,157

Less: Total Cost of Sales - Utility (Excluding Depreciation & Amortization) (A)	Less: Total Cost of Sales - Utility (Excluding Depreciation & Amortization) (A)	19,928		15,084		74,045		84,062		Less: Total Cost of Sales - Utility (Excluding Depreciation & Amortization) (A)	58,305		54,116
Less: Depreciation & Amortization (A)	Less: Depreciation & Amortization (A)	9,933		6,681		19,181		13,204		Less: Depreciation & Amortization (A)	22,428		9,248
Total GAAP Gross Margin	Total GAAP Gross Margin	27,982		23,089		108,774		87,762		Total GAAP Gross Margin	76,813		80,793
Add: Depreciation & Amortization (A)	Add: Depreciation & Amortization (A)	9,933		6,681		19,181		13,204		Add: Depreciation & Amortization (A)	22,428		9,248
Less: Regulatory Rider Expenses (B)	Less: Regulatory Rider Expenses (B)	3,747		1,199		9,046		3,459		Less: Regulatory Rider Expenses (B)	10,251		5,302
Utility Margin (C)	Utility Margin (C)	$	34,168	$	28,571	$	118,909	$	97,507	Utility Margin (C)	$	88,990	$	84,739

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		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Utility Margin:	Utility Margin:									Utility Margin:
Residential	Residential	$	22,135	$	15,980	$	79,568	$	62,501	Residential	$	65,981	$	57,433
Commercial & Industrial	Commercial & Industrial	15,637		12,135		43,549		34,108		Commercial & Industrial	33,057		27,912
Regulatory Rider Expenses (B)	Regulatory Rider Expenses (B)	(3,604)		456		(4,208)		898		Regulatory Rider Expenses (B)	(10,048)		(606)
Utility Margin (C)	Utility Margin (C)	$	34,168	$	28,571	$	118,909	$	97,507	Utility Margin (C)	$	88,990	$	84,739

(A) Does not include amortization of debt issuance costs that are recorded as Interest Charges on the condensed consolidated statements of ~~income (loss).~~income.

(B) Represents pass-through expenses for which there is a corresponding credit in operating revenues. Therefore, such recoveries have no impact on ETG's financial results.

(C) Utility Margin is a non-GAAP financial measure and is further defined under the caption "Utility Margin - SJG Utility Operations" above. The definition of Utility Margin is the same for each of the Utilities.

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ETG's business consists of natural gas distribution to residential, commercial and industrial customers in northern and central New Jersey. ETG's operating revenues consist of firm sales and transportation, as well as interruptible sales and transportation. ETG does not have any off-system sales. ~~The Utility Margin at ETG is considered a non-GAAP measure and calculated the same as SJG as discussed under "Utility Margin" above.~~

Revenues from the gas utility operations at ETG increased ~~$13.0~~$13.4 million, or ~~29.0%, and $17.0 million, or 9.2%,~~9.3% for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019 primarily due to favorable changes in base rates resulting from the completion of ETG's rate case in November 2019, along with customer growth.~~2020. Utility Margin from the gas utility operations at ETG increased ~~$5.6~~$4.3 million or ~~19.6%, and $21.4 million, or 21.9%,~~5.0% for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019~~2020. These increases in revenues and Utility Margin compared to the prior year period are primarily due to ~~the favorable change in base rates and~~ customer growth ~~as noted above.~~

~~ELK Utility Operations:~~

The activities of ELK utility operations are not material to SJI's financial results. On July 31, 2020, SJI, through its wholly-owned subsidiary SJIU, closed on its transaction to sell ELK to a third-party buyer. See Note 20 toand colder weather during the ~~condensed consolidated financial statements.~~current year period.

Nonutility:

Operating Revenues - Energy ~~Group~~Management

Combined revenues for Energy ~~Group,~~Management, net of intercompany transactions, ~~decreased $34.0~~increased $124.4 million, or ~~23.4%~~88.3%, to ~~$111.5 million, and decreased $105.6 million, or 29.6%, to $251.6~~$265.3 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019.~~2020. The significant drivers for the overall change were as follows:

•Revenues from wholesale energy operations at SJRG, net of intercompany transactions, ~~decreased $25.0~~increased $133.1 million to ~~$101.5 million and decreased $86.6 million to $229.8~~$261.5 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020 primarily due to ~~lower sales~~revenues earned on ~~fuel~~gas supply ~~management~~ contracts, ~~that SJRG has with several~~including two electric generation facilities ~~which was a result of decreases~~that began operating after March 31, 2020, along with increases in the average monthly NYMEX settle ~~price. Also contributing to the six month comparative period decrease was maintenance~~price and ~~scheduled outages at these electric generation facilities during~~colder weather experienced in the first quarter of 2020. Also impacting the comparative period revenues was the change in unrealized gains and losses recorded on forward financial contracts due to price volatility, which is excluded for Economic Earnings and represented a total decrease of $3.2 million and a total increase of $7.7 million for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019. As discussed in Note 1 to the condensed consolidated financial statements, revenues and expenses related to the energy trading activities of the wholesale energy operations at SJRG are presented on a net basis in Operating Revenues – Nonutility on the condensed consolidated statement of income (loss).2021.

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•Revenues from retail ~~electric operations at SJE,~~services, net of intercompany transactions, decreased ~~$9.1~~$8.7 million to ~~$10.0 million and decreased $19.1 million to $21.6~~$3.8 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020 primarily due to lower overall sales volumes as SJE ~~did~~chose not to renew several contracts that have expired over the last twelve months. ~~Partially offsetting this decrease~~This was partially offset with revenues earned at EnerConnex, which became a wholly-owned subsidiary in the ~~change in unrealized gains and losses recorded on forward financial contracts due to price volatility, which is excluded for Economic Earnings and represented a total increase~~second half of ~~$2.1 million and $3.0 million for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019.~~2020.

SJE uses forward financial contracts to mitigate commodity price risk on fixed price electric contracts. In accordance with GAAP, the forward financial contracts are recorded at fair value, with changes in fair value recorded in earnings in the period of change. The related customer contracts are not considered derivatives and, therefore, are not recorded in earnings until the electricity is delivered. As a result, earnings are subject to volatility as the market price of the forward financial contracts change, even when the underlying hedged value of the customer contract is unchanged. Over time, gains or losses on the sale of the fixed price electric under contract will be offset by losses or gains on the forward financial contracts, resulting in the realization of the profit margin expected when the transactions were initiated. The retail electric operations at SJE serve both fixed and market-priced customers.

As discussed in Note 1 to the condensed consolidated financial statements, revenues and expenses related to the energy trading activities of the wholesale energy operations at SJRG are presented on a net basis in Operating Revenues – Nonutility on the condensed consolidated statement of income.

Operating Revenues - Energy ~~Services~~Production

Combined revenues for Energy ~~Services,~~Production, net of intercompany transactions, ~~decreased $11.9~~increased $0.1 million, or ~~81.9%~~0.9%, to ~~$2.6 million, and decreased $16.1 million, or 62.2%, to $9.8~~$6.3 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019. The significant drivers for the overall change were as follows:~~

•Revenues from on-site energy production at Marina, net of intercompany transactions, decreased $12.3 million to $1.8 million and decreased $16.8 million to $8.1 million for the three and six months ended June 30, 2020, ~~respectively, compared with the same periods in 2019,~~ primarily due to revenues earned on the Annadale fuel cell project, partially offset with lack of revenues from MTF and ACB subsequent to the sale that was completed February 18, 2020 (see Note 1 to the condensed consolidated financial statements).

•~~The change in revenues from appliance service operations at SJESP, net of intercompany transactions, was not significant.~~

Gross Margin - Energy ~~Group~~Management & Energy ~~Services~~Production

Gross margin for the Energy ~~Group~~Management and Energy ~~Services~~Production businesses is a GAAP measure and is defined as revenue less all costs that are directly related to the production, sale and delivery of SJI's products and services. These costs primarily include natural gas and electric commodity costs as well as certain payroll and related benefits. On the condensed consolidated statements of income, ~~(loss),~~ revenue is reflected in Operating Revenues - Nonutility and the costs are reflected in Cost of Sales - Nonutility. As discussed in Note 1 to the condensed consolidated financial statements, revenues and expenses related to the energy trading activities of the wholesale energy operations at SJRG are presented on a net basis in Operating Revenues - Nonutility on the condensed consolidated statements of ~~income (loss).~~income.

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Gross margin is broken out between Energy ~~Group~~Management and Energy ~~Services,~~Production, which are comprised of a group of segments as described in Note 6 to the condensed consolidated financial statements.

Gross Margin - Energy ~~Group~~Management

Combined gross margins for Energy ~~Group~~Management increased ~~$10.4~~$10.3 million to ~~$9.2 million and increased $20.8 million to $19.2~~$21.1 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019.~~2020. The significant drivers for the overall change were as follows:

•Gross margin from the wholesale energy operations at SJRG increased ~~$8.5~~$9.9 million to ~~$8.7 million, and increased $18.4 million to $18.8~~$20.0 million, for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020, primarily due to higher margins on daily energy trading activities ~~along with a refund received from a third party gas supplier~~ as ~~discussed~~well as colder weather experienced in ~~Note 1 to~~ the condensed consolidated financial statements. Also impacting the comparative period gross margins was the change in unrealized gains and losses recorded on forward financial contracts due to price volatility, which is excluded for Economic Earnings and represented a total decreasefirst quarter of ~~$3.2 million and a total increase of $7.7 million for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019.~~2021.

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The wholesale energy operations at SJRG are expected to continue to add incremental margin from marketing and related opportunities in the Marcellus region, capitalizing on its established presence in the area. Future margins could fluctuate significantly due to the volatile nature of wholesale gas prices.

•Gross margin from ~~SJE’s~~ retail ~~electric operations~~services increased ~~$1.9~~$0.4 million to ~~$0.4 million and increased $2.3 million to $0.3~~$1.1 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020, primarily due to margins earned at EnerConnex, which became a wholly-owned subsidiary in the ~~change in unrealized gains and losses recorded on forward financial contracts due to price volatility, which is excluded for Economic Earnings and represented a total increase~~second half of ~~$2.1 million and $3.0 million for the three and six months ended June 30, 2020, respectively, compared~~2020. This was partially offset with ~~the same periods in 2019. Partially offsetting this increase is~~ overall lower sales volumes as SJE ~~did~~chose not to renew several contracts that have expired over the last twelve months.

Gross Margin - Energy ~~Services~~Production

Combined gross margins for Energy ~~Services~~Production decreased ~~$9.9~~$0.2 million to ~~$2.9 million and decreased $12.7 million to $9.5~~$5.6 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019. The significant drivers for the overall change were as follows:~~

•~~Gross margin from on-site energy production at Marina decreased $10.2 million to $2.0 million and decreased $13.4 million to $7.8 million for the three and six months ended June 30,~~ 2020, ~~respectively, compared with the same periods in 2019,~~ primarily due to lack of margin from MTF and ACB subsequent to the sale that was completed February 18, 2020 (see Note 1 to the condensed consolidated financial statements).

•~~The change~~, partially offset with margins earned on the Annadale fuel cell project in ~~gross margin from appliance service operations at SJESP was not significant.~~

the three months ended March 31, 2021.

Operating Expenses - All Segments:

A summary of net changes in ~~operations~~Operations and Maintenance expense for the three ~~and six~~ months ended ~~June 30,~~March 31, follows (in thousands):

Three Months Ended June 30,
2020 vs. 2019 Six Months Ended June 30,
2020 vs. 2019
SJI Utilities:
   SJG Utility Operations $ 160 $ (314)
   ETG Utility Operations 1,852 8,350
   ELK Utility Operations (179) (105)
        Subtotal SJI Utilities 1,833 7,931
Nonutility:
Energy Group:
   Wholesale Energy Operations 64 118
   Retail Electric Operations 38 (2)
      Subtotal Energy Group 102 116
Energy Services:
   On-Site Energy Production (5,789) (7,573)
   Appliance Service Operations (16) 99
Subtotal Energy Services (5,805) (7,474)
Midstream 229 228
Corporate & Services and Intercompany Eliminations (311) (5,223)
Total Operations Expense $ (3,952) $ (4,422)


	Three Months Ended March 31, 2021 vs. 2020
SJI Utilities:
SJG Utility Operations	$	74
ETG Utility Operations	3,165
ELK Utility Operations	(600)
Subtotal SJI Utilities	2,639
Nonutility:
Energy Management:
Wholesale Energy Operations	20
Retail Services	(178)
Subtotal Energy Management	(158)
Energy Production:
Renewables	(4,281)

Subtotal Energy Production	(4,281)
Midstream	4
Corporate & Services and Intercompany Eliminations	(52)
Total Operations and Maintenance Expense	$	(1,848)

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Operations ~~Expense~~

The change in SJG utility operations expense for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019, was not significant. Changes in SJG utility operations expense are typically due to the operation of SJG’s CLEP and EEP, for which costs are recovered on a dollar-for-dollar basis; therefore, SJG experiences an offsetting change in revenue.& Maintenance

ETG utility operations and maintenance expense increased ~~$1.9 million and $8.4~~$3.2 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020, primarily due to the operation of ETG's RAC, which experienced an aggregate net increase. Such costs are recovered on a dollar-for-dollar basis; therefore, ETG experienced an offsetting increase in revenue during the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in the prior year. ~~Also contributing to the increase was higher expenses in various areas, including those associated with corporate support, governance and compliance costs.~~

~~Combined operations~~Operations and Maintenance expense for ~~the~~ Energy ~~Group and Energy Services~~Production decreased ~~$5.7 million and $7.4~~$4.3 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020, primarily due to the sale of MTF and ACB, ~~(see Note 1 to~~partially offset with the ~~condensed consolidated financial statements).~~impact of Annadale.

The change in operations and maintenance expense for ~~the Corporate & Services segment~~all other segments, including SJG utility operations, for the three months ended ~~June 30, 2020~~March 31, 2021 compared with the same period in ~~2019~~2020 was not significant. The Corporate & Services segment had a $5.2 million decrease in Operations Expense for the six months ended June 30, 2020 compared with the same period in 2019, primarily due to less severance and other employee separation costs and less costs incurred to exit the TSA, which occurred in March 2020, along with intercompany eliminations.

~~Maintenance~~ ~~- The change in maintenance expense for the three and six months ended June 30, 2020 compared with the same periods in 2019 was not significant.~~

Depreciation - Depreciation increased ~~$3.3 million and $6.1~~$5.3 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020, primarily due to increased investment in property, plant and equipment by the gas utility operations of SJG and ETG. ~~This was partially offset by reduced depreciation expense at Marina as a result of the MTF & ACB sale (see Note 1 to the condensed consolidated financial statements).~~

Energy and Other Taxes - The change in energy and other taxes for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 compared with the same ~~periods~~period in ~~2019~~2020 was not significant.

Other Income and Expense - Other income and expense increased ~~$3.6~~$3.2 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared with the same period in ~~2019,~~2020, primarily due to higher investment performance ~~and higher AFUDC income at SJG. The change in other income and expense for the six months ended June 30, 2020 compared with the same period in 2019 was not significant,~~ as ~~the increases in the three month comparative period change noted above were offset with similar decreases in~~ the first quarter of 2020 ~~compared to~~saw weaker market conditions from the ~~same period in 2019.~~beginning of the COVID-19 pandemic. Also contributing is higher SJG AFUDC income.

Interest Charges – ~~Interest~~The change in interest charges ~~increased $0.2 million and $4.0 million~~ for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019, primarily due to interest incurred on higher amounts of long-term debt outstanding at SJI and SJG.~~2020 was not significant.

Income Taxes – Income tax ~~benefit decreased $4.5~~expense increased $8.4 million for the three months ended June 30, 2020 compared to the same period in 2019 primarily due to a lower loss before income taxes during the second quarter of 2020. Income tax expense increased $12.9 million for the six months ended June 30, 2020March 31, 2021 compared with the same period in ~~2019,~~2020, primarily due to ~~the increase in~~higher income before income taxes in 2020 compared with the prior year, along with a one-time tax adjustment at SJG resulting from SJG's Stipulation of Settlement with the BPU as part of its recent rate case filing that occurred in the first quarter of 2020 (see Note 7 to the condensed consolidated financial statements).taxes.

Equity in Earnings of Affiliated Companies – The change in equity in earnings of affiliated companies for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019~~2020 was not significant.

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LIQUIDITY AND CAPITAL RESOURCES:

Liquidity needs are driven by factors that include natural gas commodity prices; the impact of weather on customer bills; lags in fully collecting gas costs from customers under the BGSS charge and other regulatory clauses, settlement of legal matters, and environmental remediation expenditures through the RAC; working capital needs of SJI's energy trading and marketing activities; the timing of construction and remediation expenditures and related permanent financings; the timing of equity contributions to unconsolidated affiliates; mandated tax payment dates; both discretionary and required repayments of long-term debt; and the amounts and timing of dividend payments.

Cash flows for the period were the following (in thousands):


	Three months ended March 31, 2021		Three months ended March 31, 2020
Net Cash Provided by Operating Activities	$	198,463	$	165,898
Net Cash Used in Investing Activities	$	(112,328)	$	(10,055)
Net Cash Provided by Financing Activities	$	(96,098)	$	(152,191)

Cash Flows from Operating Activities — Liquidity needs are first met with net cash provided by operating activities. ~~Net cash provided by operating activities totaled $206.3 million and $216.1 million in the first six months of 2020 and 2019, respectively.~~ Net cash provided by operating activities varies from year-to-year primarily due to the impact of weather on customer demand and related gas purchases, customer usage factors related to conservation efforts and the price of the natural gas commodity, inventory utilization, and gas cost recoveries. Cash flows provided by operating activities in the first ~~six~~three months of ~~2020~~2021 produced ~~less~~more net cash than the same period in ~~2019,~~2020, primarily due to ~~lower revenues on fuel supply management contracts at SJRG (see "Operating Revenues-Energy Group") along with~~ the ~~timing of a refund from a third party gas supplier that was received in July (see Note 1 to the condensed consolidated financial statements). These changes are partially offset with higher ETG~~following: (1) SJG revenues due to favorable changes in base rates resulting from the completion of ~~ETG's~~SJG's rate case in ~~November 2019 (see "ETG Utility Operations").~~September 2020; (2) higher margins and increased collections on daily energy trading activities at SJRG; and (3) customer growth at ETG.

Cash Flows from Investing Activities — SJI has a continuing need for cash resources and capital, primarily to invest in new and replacement facilities and equipment. ~~Net cash outflows from investing activities, which are primarily construction projects, for the first six months of 2020 and 2019 amounted to $135.1 million and $222.2 million, respectively.~~ We estimate the cash outflows for investing activities, net of refinancings and returns/advances on investments from affiliates, for fiscal years ~~2020,~~ 2021, 2022 and ~~2022~~2023 at SJI to be approximately ~~$491.3~~$801.5 million, ~~$777.3~~$758.3 million and ~~$650.1~~$701.3 million, respectively. The high level of investing activities for ~~2020,~~ 2021, 2022 and ~~2022~~2023 is due to the accelerated infrastructure investment programs and future capital expenditures at SJG and ETG, projected investment in PennEast, ~~in 2021 and 2022,~~ and investments in future renewable energy ~~projects.~~projects including efforts to meet our decarbonization goals, which were announced in April 2021. targeting 70% reduction in emissions by 2030 and 100% by 2040, with at least 25% of capital spending annually in support of sustainability investments. SJI expects to use short-term borrowings under lines of credit from commercial banks and a commercial paper program to finance these investing activities as incurred. From time to time, SJI may refinance the short-term debt with long-term debt.

Other ~~key~~significant investing activities of SJI during the first ~~six~~three months of ~~2020~~2021 and ~~2019~~2020 were as follows:

•SJI received approximately $97.0 million from the sale of MTF and ACB during the ~~six~~three months ended ~~June 30,~~March 31, 2020. ~~See Note 1 to the condensed consolidated financial statements.~~

•During the six months ended June 30, 2020, SJI paid $2.8 million to acquire ESNJ-AL-Somerspoint LLC, ESNJ-AL-Hamiltonsquare LLC, and ESNJ-AL-BrownsMills LLC, which own and operate solar-energy projects in New Jersey. See Note 17 to the condensed consolidated financial statements.

•SJI received approximately $7.2 million ~~and $24.3 million during the first six months of 2020 and 2019, respectively,~~ from the sale of certain solar ~~assets. See Note 1 to~~assets during the ~~condensed consolidated financial statements.~~

•~~During the first six~~three months ~~of 2020 and 2019, SJI made net investments in unconsolidated affiliates of $2.0 million and $3.9 million, respectively.~~ended March 31, 2020.

•~~During the first six months of 2019, SJI received $15.6 million as an adjustment to the purchase price related to the Acquisition.~~

Cash Flows from Financing Activities — Short-term borrowings from the commercial paper program and lines of credit from commercial banks are used to supplement cash flows from operations, to support working capital needs and to finance capital expenditures and acquisitions as incurred. ~~From time to time, short-term debt incurred to finance capital expenditures is refinanced with long-term debt.~~

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~~Credit facilities and available liquidity as of June 30, 2020 were as follows (in thousands):~~

Company Total Facility Usage Available Liquidity Expiration Date
SJI:
SJI Syndicated Revolving Credit Facility $ 500,000 $ 28,000 (A) $ 472,000 August 2022
Term Loan Credit Agreement 150,000 150,000 — March 2021
Total SJI 650,000 178,000 472,000
SJG:
Commercial Paper Program/Revolving Credit Facility 200,000 161,300 (B) 38,700 August 2022
Uncommitted Bank Line 10,000 — 10,000 September 2020 (D)
Total SJG 210,000 161,300 48,700
ETG/SJIU:
ETG/SJIU Revolving Credit Facility 200,000 124,900 (C) 75,100 April 2022
Total $ 1,060,000 $ 464,200 $ 595,800

~~(A) Includes letters of credit outstanding in the amount of $9.6 million, which is used to enable SJE to market retail electricity as well as for various construction and operating activities.~~

~~(B) Includes letters of credit outstanding in the amount of $0.8 million, which supports the remediation of environmental conditions at certain locations in SJG's service territory.~~

~~(C) Includes letters of credit outstanding in the amount of $1.0 million, which supports ETG's construction activity.~~

~~(D) SJG intends to renew this facility prior to expiration.~~

For SJI, the $464.2 million of usage in the table above, less the letters of credit noted in (A)-(C) above, equal the $452.8 million recorded as Notes Payable on the condensed consolidated balance sheet as of June 30, 2020. For SJG, the $161.3 million of usage in the table above, less the letters of credit noted in (B) above, equal the $160.5 million recorded as Notes Payable on the condensed balance sheet as of June 30, 2020.

SJI's Five Year Revolving Credit Agreement ("Credit Agreement") allows SJI to borrow in the form of revolving loans a total aggregate amount of $500.0 million. In addition, as part of the total $500.0 million extension of credit, the Credit Agreement provides for swingline loans (in an amount not to exceed an aggregate of $50.0 million ) and letters of credit (in an amount not to exceed an aggregate of $200.0 million), each at the applicable interest rates specified in the Credit Agreement. Subject to certain conditions set forth in the Credit Agreement, the Company may increase the revolving credit facility up to a maximum aggregate amount of $100.0 million (for a total facility of up to $600.0 million), although no lender is obligated to increase its commitment.

SJIU and ETG (as Borrowers) have a $200.0 million revolving credit agreement with several lenders. The revolving credit agreement provides for the extension of credit to the Borrowers in a total aggregate amount of $200.0 million. See Note 10 to the condensed consolidated financial statements.

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The Utilities' (including SJG) facilities are restricted as to use and availability specifically to the respective Utilities; however, if necessary, the SJI facilities can also be used to support liquidity needs of the Utilities. All committed facilities contain one financial covenant limiting the ratio of indebtedness to total capitalization of the applicable borrowers (as defined in the respective credit agreements), measured on a quarterly basis. SJI and the Utilities were in compliance with these covenants as of June 30, 2020. Borrowings under these credit facilities are at market rates.

SJI's weighted average interest rate on these borrowings (inclusive of SJG, ETG and SJIU), which changes daily, was 1.27% and 3.45% at June 30, 2020 and 2019, respectively. SJG's weighted average interest rate on these borrowings, which changes daily, was 0.74% and 2.60% at June 30, 2020 and 2019, respectively.

SJI's average borrowings outstanding under these credit facilities (inclusive of SJG, ETG and SJIU), not including letters of credit, during the six months ended June 30, 2020 and 2019 were $595.3 million and $347.2 million, respectively. The maximum amounts outstanding under these credit facilities, not including letters of credit, during the six months ended June 30, 2020 and 2019 were $872.2 million and $687.2 million, respectively.

SJG's average borrowings outstanding under these credit facilities during the six months ended June 30, 2020 and 2019 were $146.3 million and $72.5 million, respectively. The maximum amount outstanding under its credit facilities during the six months ended June 30, 2020 and 2019 were $171.7 million and $108.0 million, respectively.

~~Based upon the existing credit facilities and a regular dialogue with our banks, we believe there will continue to be sufficient credit available to meet our business’ future liquidity needs.~~

The SJI and the Utilities (including SJG) principal credit facilities are provided by a syndicate of banks. The NPA for Senior Unsecured Notes issued by SJI, and the SJG bank facilities, contain a financial covenant limiting the ratio of indebtedness to total capitalization (as defined in the respective NPA or credit agreement) to not more than 0.70 to 1, measured at the end of each fiscal quarter. For SJI, the equity units are treated as equity (as opposed to how they are classified on the condensed consolidated balance sheet, as long-term debt) for purposes of the covenant calculation. SJI and SJG were in compliance with these covenants as of June 30, 2020.

SJG has a commercial paper program under which SJG may issue short-term, unsecured promissory notes to qualified investors up to a maximum aggregate amount outstanding at any time of $200.0 million. The notes have fixed maturities which vary by note, but may not exceed 270 days from the date of issue. Proceeds from the notes are used for general corporate purposes. SJG uses the commercial paper program in tandem with its $200.0 million revolving credit facility and does not expect the principal amount of borrowings outstanding under the commercial paper program and the credit facility at any time to exceed an aggregate of $200.0 million.

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SJI supplements its operating cash flow, commercial paper program and credit lines with both debt and equity capital. Over the years, SJG has used long-term debt, primarily in the form of First Mortgage Bonds and Medium Term Notes, secured by the same pool of utility assets, to finance its long-term borrowing needs. These needs are primarily capital expenditures for property, plant and equipment.

~~2020 Activity:~~Credit facilities and available liquidity as of March 31, 2021 were as follows (in thousands):

~~Debt Issuances/Paydowns~~


Company	Total Facility		Usage			Available Liquidity		Expiration Date
SJI:
SJI Syndicated Revolving Credit Facility	$	500,000	$	136,700	(A)	$	363,300	August 2022




Total SJI	500,000		136,700			363,300

SJG:
Commercial Paper Program/Revolving Credit Facility	200,000		1,400		(B)	198,600		August 2022
Uncommitted Bank Line	10,000		—			10,000		September 2021

Total SJG	210,000		1,400			208,600

ETG/SJIU:
ETG/SJIU Revolving Credit Facility	200,000		45,100		(C)	154,900		April 2023

Total	$	910,000	$	183,200		$	726,800

~~On March 26, 2020,~~(A) Includes letters of credit outstanding in the amount of $9.5 million, which is used to enable SJE to market retail electricity as well as for various construction and operating activities.

(B) Includes letters of credit outstanding in the amount of $1.4 million, which supports the remediation of environmental conditions at certain locations in SJG's service territory.

For SJI ~~entered into an unsecured $150.0 million term loan agreement, which bears interest at variable rates. The maturity date~~and SJG, the amount of usage shown in the ~~term loan is March 25, 2021,~~table above, less the letters of credit noted in (A)-(C) for SJI and (B) for SJG above, equals the ~~loan is~~amounts recorded inas Notes Payable on the respective condensed consolidated balance sheets as of ~~June 30, 2020. The proceeds of the loan were used for general corporate purposes.~~March 31, 2021.

~~On April 3, 2020, SJI entered into an unsecured $200.0 million term loan~~Based upon the existing credit ~~agreement, which bears interest at variable rates. The maturity of the term loan is October 31, 2021. Proceeds from the debt were used~~facilities and a regular dialogue with our banks, we believe there will continue to ~~pay down the following:~~be sufficient credit available to meet our business’ future liquidity needs.

•~~$50.0 million outstanding on~~Each of the credit facilities are provided by a syndicate of banks. The NPA for Senior Unsecured Notes issued by SJI, ~~Revolving~~and the Utilities' credit ~~facility, which was previously recorded~~facilities, contain a financial covenant limiting the ratio of indebtedness to total capitalization (as defined in ~~Notes Payable~~the respective NPA or credit agreement) to not more than 0.70 to 1, measured at the end of each fiscal quarter. SJI and the Utilities were in compliance with these covenants as of March 31, 2021. For SJI, the equity units are treated as equity (as opposed to how they are classified on the condensed consolidated balance ~~sheets.~~sheet, as long-term debt) for purposes of the covenant calculation.

•~~$100.0 million SJI Term Loan, which was previously recorded in Notes Payable on~~For additional information regarding the terms of the credit facilities as well as weighted average interest rates, average borrowings outstanding and maximum amounts outstanding under these credit facilities see Note 10 to the condensed consolidated ~~balance sheets and due to mature in September 2020.~~financial statements.

•~~$50.0 million SJI variable rate note, which was previously recorded in current portion of long-term debt on the condensed consolidated balance sheets.~~

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On April 16, 2020, SJG entered into a Note Purchase Agreement which provides for SJG to issue and sell its Senior Secured Notes, Series F, 2020 in the aggregate principal amount of $525.0 million in three Tranches, as follows: (a) Senior Secured Notes, Series F, 2020, Tranche A due April 16, 2030 in the aggregate principal amount of $150.0 million; (b) Senior Secured Notes, Series F, 2020, Tranche B due April 16, 2050 in the aggregate principal amount of $250.0 million; and (c) Senior Secured Notes, Series F, 2020, Tranche C expected to be due October 1, 2050 in the aggregate principal amount of $125.0 million. All of the Tranche A Notes and the Tranche B Notes were issued on April 16, 2020, and bear interest at 3.28% and 3.93%, respectively. The Tranche C Notes are expected to be issued on October 1, 2020.2021 Activity:

On April 26, 2020, SJG used proceeds from Tranche A and B discussed above to pay off $400.0 million principal amount outstanding on its term loan credit agreement, which was previously recorded in current portion of long-term debt on the condensed consolidated balance sheets.

~~On May 27, 2020,~~March 22, 2021, SJI entered into a Note Purchase Agreement which provides for the Company to issue an aggregate of $200.0 million of senior unsecured notes in two tranches, as follows: (a) Senior Notes, Series 2020A due July 30, 2027, in the aggregate principal amount of $75.0 million (the "Series 2020A Notes"); and (b) Senior Notes, Series 2020B due July 30, 2030, in the aggregate principal amount of $125.0 million (the "Series 2020B Notes"). The Company issued the Notes on July 30, 2020. The Series 2020A Notes will bear interest at 3.71% and the Series 2020B Notes will bear interest at 3.91%. The proceeds from this issuance were used to pay off the unsecured $200.0 million term loan credit agreement issued in April 2020, which was paid off on July 31, 2020.

~~ATM Equity Offering~~

~~In April 2020, SJI entered into an ATM Equity Offering Sales Agreement (the "Sales Agreement") to sell, from time to time,~~offered 10,250,000 shares of ~~the Company’s~~its common stock, par value $1.25 per share, ~~having an aggregate sale~~at a public offering price ~~up to $200.0 million, through an “at-the-market” equity offering program. Pursuant to~~of $22.25 per share. Of the ~~Sales Agreement, the~~offered shares, 362,359 shares were issued at closing. The remaining 9,887,641 shares of common stock ~~were~~("Forward Shares") are to be ~~offered and~~ sold ~~through any~~by Bank of ~~the named sales agents in negotiated transactions or transactions that are deemed~~America, N.A., as forward seller, pursuant to ~~be “at-the-market” offerings. In June 2020, 8,122,283~~a forward sale agreement. On March 25, 2021, 1,537,500 shares ~~were sold~~ pursuant to the ~~Sales Agreement~~underwriters’ option as part of the underwriting agreement for the above offering of shares were issued at ~~an average market~~the same public offering price of ~~approximately $24.62 for~~$22.25. The total share issuance of 1,899,859 resulted in gross proceeds of $42.3 million, with net proceeds, ~~of $198.0 million~~ after deducting underwriting discounts and commissions ~~and other general & administrative expenses. These sales exhausted the shares that were available for sale under the Sales Agreement.~~ ~~The Company intends to use the net proceeds from~~ ~~this offering for general corporate purposes.~~

~~2019 Activity:~~as well as legal fees, totaling $40.6 million.

On ~~January~~March 22, 2021, SJI issued and sold 6,000,000 Equity Units, initially consisting of Corporate Units, which resulted in gross proceeds of approximately $300.0 million, with net proceeds, after deducting underwriting discounts and commissions, of $291.0 million. As of March 31, 2021 the net proceeds, after amortization of the underwriting discounts, are recorded as Long-Term Debt on the condensed consolidated balance sheets. On April 1, 2021, the underwriters purchased an additional 700,000 Equity Units, resulting in gross proceeds totaling $35.0 million, with net proceeds, after deducting underwriting discounts and commissions, totaling $34.0 million.

On March 25, 2021, the Company finalized the remarketing of the $287.5 million of Series A Junior Subordinated Notes.

On April 15, ~~2019, SJI settled its equity forward sale agreement by physically delivering~~2021, as a result of settlement of outstanding stock purchase contracts associated with the ~~remaining 6,779,661~~2018 Corporate Units, the Company received approximately $287.5 million in exchange for approximately 9.8 million shares of common stock and receiving net cash proceeds of approximately $189.0 million. The forward price used to determine cash proceeds received by SJI at settlement was calculated based on the initial forward sale price, as adjusted for underwriting fees, interest rate adjustments as specified in the equity forward agreement and any dividends paid on our common stock during the forward period.stock.

~~During~~For more information on the ~~six months ended June 30, 2019, SJI repaid $475.0 million aggregate principal amount of Floating Rate Senior Notes, Series 2018D.~~above activity, see Note 4 to the condensed consolidated financial statements.

~~During the six months ended June 30, 2019,~~In March 2021, SJI paid off ~~$60.0~~its $150.0 million term loan agreement at maturity.

In April 2021, SJI repaid the $90.0 million principal amount outstanding on its ~~3.30% Senior~~3.43% Series 2018-A Notes ~~Series 2014A-1, due June 26, 2019, and paid off $40.0 million principal amount outstanding on its Floating Rate Senior Notes, Series 2014B-1, due June 26, 2019.~~

~~Also during the six months ended June 30, 2019, SJG issued $10.0 million of debt by drawing on its $400.0 million term loan credit agreement.~~

~~Current Portion of Long-Term Debt & Short-Term Borrowings~~ ~~- See Note 1 to the condensed consolidated financial statements.~~at maturity.

DRP - See Note 4 to the condensed consolidated financial statements.

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SJI’s capital structure was as follows:


		As of June 30, 2020		As of December 31, 2019			As of March 31, 2021		As of December 31, 2020
Equity	Equity	34.7	%	29.6	%	Equity	34.0	%	32.2	%
Long-Term Debt	Long-Term Debt	55.9	%	52.8	%	Long-Term Debt	62.6	%	56.4	%
Short-Term Debt	Short-Term Debt	9.4	%	17.6	%	Short-Term Debt	3.4	%	11.4	%
Total	Total	100.0	%	100.0	%	Total	100.0	%	100.0	%

During the three months ended March 31, 2021 and 2020, SJI declared quarterly dividends to its common shareholders, which were paid in April 2021 and 2020, respectively. SJI has ~~paid~~a long history of paying dividends on its common stock ~~for 69 consecutive years~~ and has increased ~~that~~its dividend ~~each~~every year ~~for the last 21 years.~~since 1999. SJI’s current long-term goals are to grow the dividend at a rate consistent with earnings growth over the long term, subject to the approval of its Board of Directors, with a long-term targeted payout ratio of between 55% and 65% of Economic ~~Earnings.~~Earnings In setting the dividend rate, the Board of Directors of SJI considers future earnings expectations, payout ratio, and dividend yield relative to those at peer companies, as well as returns available on other income-oriented investments. However, there can be no assurance that SJI will be able to continue to increase the dividend, meet the targeted payout ratio or pay a dividend at all in the future.

COMMITMENTS AND CONTINGENCIES:

Environmental Remediation - ~~Costs for remediation projects, net of recoveries from ratepayers, for the first six months of 2020 and 2019 amounted to net cash outflows of $16.3 million and $11.6 million, respectively.~~ Total net cash outflows for remediation projects are expected to be ~~$43.2~~$36.6 million, ~~$58.3~~$57.2 million and ~~$69.5~~$48.6 million for ~~2020,~~ 2021, 2022 and ~~2022,~~2023, respectively. As discussed in Notes 10 and 15 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's 10-K for the year ended December 31, ~~2019,~~2020, certain environmental costs are subject to recovery from ratepayers.

Affiliate Loans - See Note 3 to the condensed consolidated financial statements.

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Convertible Units, Equity Units and Forward Shares - See Note 4 to the condensed consolidated financial statements.

Standby Letters of Credit - See Notes 10 and 11 to the condensed consolidated financial statements.

Contractual Obligations - There were no significant changes to SJI’s contractual obligations described in Note 15 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, except for the ~~following:~~

•RC Cape May Holdings, LLC has communicated to SJG that it no longer intends to proceed with a project to re-power the former BL England facility with natural gas. As of March 2020, SJG had determined that the project under construction will be abandoned. SJG requested that the project costs spent to date of $10.1 million be recoveredEquity Units issued as a regulatory asset within its March 2020 rate case petition filed with the BPU. As such, the amount has been reclassified from Utility Plant and is presented as a Regulatory Asset within the condensed consolidated balance sheets at June 30, 2020. The matter is currently pending with the BPU. Seediscussed in Note ~~8 to the condensed consolidated financial statements.~~

•~~Both SJI and SJG entered into agreements to issue or pay off short-term and long-term debt. See "Cash Flows from Financing Activities" above, along with Notes 10 and 14~~4 to the condensed consolidated financial statements.

Off-Balance Sheet Arrangements – An off-balance sheet arrangement is any contractual arrangement involving an unconsolidated entity under which SJI has either made guarantees, or has certain other interests or obligations.

See "Guarantees" in Note 11 to the condensed consolidated financial statements for more detail.

Notes Receivable-Affiliates - See Note 3 to the condensed consolidated financial statements.

Pending Litigation — SJI and SJG are subject to claims, actions and other legal proceedings arising in the ordinary course of business. Neither SJI nor SJG can make any assurance as to the outcome of any of these actions but, based on an analysis of these claims and consultation with outside counsel, we do not believe that any of these claims, other than those described in Note 11 to the condensed consolidated financial statements, are reasonably likely to have a material impact on the business or financial statements of SJI or SJG. See Note 11 to the condensed consolidated financial statements for more detail on these claims.

PennEast - See Note 3 to the condensed consolidated financial statements.

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SOUTH JERSEY GAS COMPANY

This section of Management’s Discussion focuses on SJG for the reported periods. In many cases, explanations and disclosures for both SJI and SJG are substantially the same or specific disclosures for SJG are included in the Management's Discussion for SJI.

RESULTS OF OPERATIONS:

The results of operations for the SJG utility operations are described ~~in detail above;~~above under "Results of Operations - SJG Utility Operations"; therefore, this section primarily focuses on statistical information and other information that is not discussed in the results of operations under South Jersey Industries, Inc. ~~Refer to the section entitled “Results of Operations - SJG Utility Operations” for a detailed discussion of the results of operations for SJG.~~

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The following table summarizes the composition of selected gas utility throughput for the three ~~and six~~ month periods ended ~~June 30,~~March 31, (in thousands):


		Three Months Ended June 30,			Six Months Ended June 30,				Three Months Ended March 31,
		2020	2019	2020	2019		2021	2020
Utility Throughput – dts:	Utility Throughput – dts:					Utility Throughput – dts:
Firm Sales -	Firm Sales -					Firm Sales -
Residential	Residential	3,767	2,530	13,979	15,508	Residential	12,959	10,212
Commercial	Commercial	874	864	3,271	3,987	Commercial	2,771	2,397
Industrial	Industrial	20	64	128	259	Industrial	135	108
Cogeneration & Electric Generation	Cogeneration & Electric Generation	128	56	209	139	Cogeneration & Electric Generation	85	81
Firm Transportation -	Firm Transportation -					Firm Transportation -
Residential	Residential	160	123	610	751	Residential	509	450
Commercial	Commercial	982	966	3,331	3,673	Commercial	2,662	2,349
Industrial	Industrial	2,196	2,190	4,966	4,980	Industrial	2,823	2,770
Cogeneration & Electric Generation	Cogeneration & Electric Generation	571	1,025	1,439	2,367	Cogeneration & Electric Generation	648	868

Total Firm Throughput	Total Firm Throughput	8,698	7,818	27,933	31,664	Total Firm Throughput	22,592	19,235

Interruptible Sales	Interruptible Sales	—	—	1	6	Interruptible Sales	6	1
Interruptible Transportation	Interruptible Transportation	223	227	516	547	Interruptible Transportation	342	293
Off-System Sales	Off-System Sales	1,194	2,478	6,732	7,541	Off-System Sales	6,044	5,538
Capacity Release	Capacity Release	20,726	24,903	38,790	42,234	Capacity Release	12,327	18,064

Total Throughput - Utility	Total Throughput - Utility	30,841	35,426	73,972	81,992	Total Throughput - Utility	41,311	43,131

Throughput – Gas Utility Operations - Total gas throughput decreased ~~4.6 MMdts and 8.0~~1.8 MMdts for the three months ~~and six months~~ ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same period in ~~2019,~~2020, primarily due to volume decreases in Capacity Release resulting from lower ~~demand and warmer weather.~~demand.

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CIP - The effects of the CIP on SJG's net income and the associated weather comparisons are as follows (dollars in millions):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net Income Impact:	Net Income Impact:									Net Income Impact:
CIP – Weather Related	CIP – Weather Related	$	(2.9)	$	4.4	$	11.0	$	5.0	CIP – Weather Related	$	5.6	$	13.9
CIP – Usage Related	CIP – Usage Related	0.3		(0.8)		7.4		(0.8)		CIP – Usage Related	(6.2)		7.1
Total Net Income Impact	Total Net Income Impact	$	(2.6)	$	3.6	$	18.4	$	4.2	Total Net Income Impact	$	(0.6)	$	21.0

Weather Compared to 20-Year Average	Weather Compared to 20-Year Average	19.6% Colder		133.3% Colder		13.2% Warmer		271.9% Colder		Weather Compared to 20-Year Average	6.5% Warmer		19.8% Warmer
Weather Compared to Prior Year	Weather Compared to Prior Year	72.9% Colder		74.0% Warmer		6.3% Warmer		4.6% Warmer		Weather Compared to Prior Year	15.1 % Colder		18.1% Warmer

Operating Revenues & Margin - See SJI's Management Discussion section above.

~~Operating Expenses~~ ~~- A summary of changes in operating expenses for SJG is as follows (in thousands):~~

Three Months Ended June 30,
2020 vs. 2019 Six Months Ended June 30,
2020 vs. 2019
Operations 160 $ (314)
Maintenance 1,481 $ 1,909
Depreciation 948 $ 1,910
Energy and Other Taxes (84) $ (458)

Operations & Maintenance Expense - See SJI's Management Discussion section above.

~~Maintenance~~ - Maintenance expense increased $1.5 million and $1.9 million for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019, primarily due to an increase in RAC amortization expense resulting from increased environmental expenditures.

Depreciation - Depreciation expense increased ~~$0.9 million and $1.9~~$2.5 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019,~~2020, primarily due to New Jersey's infrastructure improvement efforts, which included the approval of SJG's AIRP and SHARP, in addition to significant investment in new technology systems.

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Energy and Other Taxes - The change in energy and other taxes for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019~~2020 was not significant.

Other Income and Expense - Other Income and Expense increased ~~$2.9~~$3.0 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared with the same period in ~~2019,~~2020, primarily due to higher investment performance ~~and higher AFUDC income. The change in other income and expense for the six months ended June 30, 2020 compared with the same period in 2019 was not significant,~~ as ~~the increases in the three month comparative period change noted above were offset with similar decreases in~~ the first quarter of 2020 ~~compared to~~saw weaker market conditions from the ~~same period in 2019.~~beginning of the COVID-19 pandemic. Also contributing is higher SJG AFUDC income.

Interest Charges – ~~The change in interest charges~~Interest Charges increased $2.2 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared with the same ~~periods~~period in ~~2019 was not significant.~~2020 primarily due to higher amounts of long-term debt from issuances that occurred in 2020.

Income Taxes – Income tax expense generally fluctuates as income before taxes changes. Minor variations will occur period to period as a result of effective tax rate adjustments. Also, during the first quarter of 2020, SJG recorded $1.2 million in tax expense related to a one-time tax adjustment resulting from ~~its Stipulation~~the BPU's approval of ~~Settlement with the BPU, as part of its recent rate case filing (see Note 7 to the condensed consolidated financial statements).~~a stipulation for SJG.

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LIQUIDITY AND CAPITAL RESOURCES:

Liquidity and capital resources for SJG are substantially covered in the Management’s Discussion of SJI (except for the items and transactions that relate to SJI and its nonutility subsidiaries). Those explanations are incorporated by reference into this discussion.

Liquidity needs for SJG are driven by factors that include natural gas commodity prices; the impact of weather on customer bills; lags in fully collecting gas costs from customers under the BGSS charge, settlement of legal matters, and environmental remediation expenditures through the RAC; the timing of construction and remediation expenditures and related permanent financings; mandated tax payment dates; both discretionary and required repayments of long-term debt; and the amounts and timing of dividend payments.

Cash flows for the period were the following (in thousands):


	Three months ended March 31, 2021		Three months ended March 31, 2020
Net Cash Provided by Operating Activities	$	125,284	$	86,431
Net Cash Used in Investing Activities	(64,233)		(56,136)
Net Cash Used in Financing Activities	(50,009)		(29,400)

Cash Flows from Operating Activities - Liquidity needs are first met with net cash provided by operating activities. ~~Net cash provided by operating activities totaled $125.5 million and $126.3 million in the first six months of 2020 and 2019, respectively.~~ Net cash provided by operating activities varies from year-to-year primarily due to the impact of weather on customer demand and related gas purchases, customer usage factors related to conversion efforts and the price of the natural gas commodity, inventory utilization, and gas cost recoveries. Cash flows provided by operating activities in the first ~~six~~three months of ~~2020 compared to~~2021 produced more net cash than the same period in ~~2019, did not change significantly.~~2020, primarily due to higher revenues due to favorable changes in base rates resulting from the completion of SJG's rate case in September 2020.

Cash Flows from Investing Activities - SJG has a continuing need for cash resources for capital expenditures, primarily to invest in new and replacement facilities and equipment. SJG estimates the net cash outflows for capital expenditures for fiscal years ~~2020,~~ 2021, 2022 and ~~2022~~2023 to be approximately ~~$283.3~~$275.0 million, ~~$320.2~~$240.5 million and ~~$327.1~~$325.4 million, respectively. For capital expenditures, including those under the AIRP and SHARP, SJG expects to use short-term borrowings under both its commercial paper program and lines of credit from commercial banks to finance capital expenditures as incurred. From time to time, SJG may refinance the short-term debt incurred to support capital expenditures with long-term debt.

Cash Flows from Financing Activities - SJG supplements its operating cash flow and credit lines with both debt and equity capital. Over the years, SJG has used long-term debt, primarily in the form of First Mortgage Bonds and Medium Term Notes, secured by the same pool of utility assets, to finance its long-term borrowing needs. These needs are primarily capital expenditures for property, plant and equipment.

See SJI's Management Discussion section above.

SJI ~~contributed~~did not contribute any equity ~~infusions of $9.5 million~~ to SJG during the ~~six~~three months ended ~~June 30,~~March 31, 2021 or 2020. ~~There were no equity infusions during the six months ended June 30, 2019.~~

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SJG’s capital structure was as follows:


		As of June 30, 2020		As of December 31, 2019			As of March 31, 2021		As of December 31, 2020
Common Equity	Common Equity	51.1	%	49.0	%	Common Equity	56.5	%	53.8	%
Long-Term Debt	Long-Term Debt	41.9	%	43.3	%	Long-Term Debt	43.5	%	44.2	%
Short-Term Debt	Short-Term Debt	7.0	%	7.7	%	Short-Term Debt	0.0	%	2.0	%

Total	Total	100.0	%	100.0	%	Total	100.0	%	100.0	%

COMMITMENTS AND CONTINGENCIES:

~~Costs for remediation projects, net of recoveries from ratepayers, for the first six months of 2020 and 2019 amounted to net cash outflows of $16.2 million and $11.5 million, respectively.~~ Total net cash outflows for remediation projects are expected to be ~~$34.8~~$19.1 million, ~~$31.5~~$25.6 million and ~~$23.3~~$33.7 million for ~~2020,~~ 2021, 2022 and ~~2022,~~2023, respectively. As discussed in Notes 10 and 15 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's 10-K for the year ended December 31, ~~2019,~~2020, certain environmental costs are subject to recovery from ratepayers.

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SJG has certain commitments for both pipeline capacity and gas supply for which SJG pays fees regardless of usage. Those commitments, as of ~~June 30, 2020,~~March 31, 2021, averaged ~~$93.2~~$80.6 million annually and totaled ~~$404.7~~$382.5 million over the contracts’ lives. Approximately ~~28%~~35% of the financial commitments under these contracts expire during the next five years. SJG expects to renew each of these contracts under renewal provisions as provided in each contract. SJG recovers all such prudently incurred fees through rates via the BGSS.

~~Pending~~ Litigation - See ~~SJG's disclosure in~~ the Commitments and Contingencies section of SJI's Management Discussion above.

Contractual Cash Obligations – There were no significant changes to SJG's contractual obligations described in Note 15 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, ~~2019, other than the BL England facility (see SJI's Management Discussion section above).~~2020.

Off-Balance Sheet Arrangements - SJG has no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

SJI:

Commodity Market Risks — Certain SJI subsidiaries, including SJG, are involved in buying, selling, transporting and storing natural gas, and buying and selling retail electricity, for their own accounts as well as managing these activities for third parties. These subsidiaries are subject to market risk on expected future purchases and sales due to commodity price fluctuations. To hedge against this risk, SJI enters into a variety of physical and financial transactions including forward contracts, swaps, futures and options agreements. To manage these transactions, SJI has a well-defined risk management policy approved by SJI's Board of Directors that includes volumetric and monetary limits. Management reviews reports detailing activity daily. Generally, the derivative activities described above are entered into for risk management purposes.

As part of its gas purchasing strategy, SJG and ETG use financial contracts to hedge against forward price risk. These contracts are recoverable through SJG's and ETG's BGSS, subject to BPU approval.

SJRG manages risk for its own portfolio by entering into the types of transactions noted above. The retail electric operations of SJE use forward physical and financial contracts to mitigate commodity price risk on fixed price electric contracts. It is management's policy, to the extent practical, within predetermined risk management policy guidelines, to have limited unmatched positions on a deal or portfolio basis while conducting these activities. As a result of holding open positions to a minimal level, the economic impact of changes in value of a particular transaction is substantially offset by an opposite change in the related hedge transaction.

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SJI has entered into certain contracts to buy, sell, and transport natural gas and to buy and sell retail electricity. SJI recorded net pre-tax unrealized gains (losses) of ~~$(1.3)~~$(0.1) million and ~~$(0.1)~~$(0.3) million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, ~~and $(1.6) million and $(12.2) million for the six months ended June 30, 2020 and 2019, respectively.which~~which are included with realized gains (losses) in Operating Revenues - Nonutility on the condensed consolidated statements of ~~income (loss).~~income.

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The fair value and maturity of these energy-related contracts determined under the mark-to-market method as of ~~June 30, 2020~~March 31, 2021 is as follows (in thousands):


Assets	Assets									Assets
Source of Fair Value	Source of Fair Value	Maturity < 1 Year		Maturity 1 -3 Years		Maturity Beyond 3 Years		Total		Source of Fair Value	Maturity < 1 Year		Maturity 1 -3 Years		Maturity Beyond 3 Years		Total
Prices actively quoted	Prices actively quoted	$	9,494	$	1,354	$	20	$	10,868	Prices actively quoted	$	10,339	$	922	$	248	$	11,509
Prices provided by other external sources	Prices provided by other external sources	9,707		4,552		1,332		15,591		Prices provided by other external sources	19,595		8,939		2,010		30,544
Prices based on internal models or other valuation methods	Prices based on internal models or other valuation methods	12,724		3,195		1,033		16,952		Prices based on internal models or other valuation methods	8,607		3,140		825		12,572

Total	Total	$	31,925	$	9,101	$	2,385	$	43,411	Total	$	38,541	$	13,001	$	3,083	$	54,625

Liabilities	Liabilities									Liabilities
Source of Fair Value	Source of Fair Value	Maturity <1 Year		Maturity 1 -3 Years		Maturity Beyond 3 Years		Total		Source of Fair Value	Maturity <1 Year		Maturity 1 -3 Years		Maturity Beyond 3 Years		Total
Prices actively quoted	Prices actively quoted	$	13,771	$	937	$	296	$	15,004	Prices actively quoted	$	2,899	$	639	$	44	$	3,582
Prices provided by other external sources	Prices provided by other external sources	8,259		1,654		1,650		11,563		Prices provided by other external sources	17,810		8,155		2,956		28,921
Prices based on internal models or other valuation methods	Prices based on internal models or other valuation methods	3,933		683		85		4,701		Prices based on internal models or other valuation methods	1,127		25		—		1,152

Total	Total	$	25,963	$	3,274	$	2,031	$	31,268	Total	$	21,836	$	8,819	$	3,000	$	33,655

•NYMEX is the primary national commodities exchange on which natural gas is traded. Volumes of our NYMEX contracts included in the table above under "Prices actively quoted" are ~~31.3~~37.1 MMdts with a weighted average settlement price of ~~$2.45~~$2.67 per dt.

•Basis represents the differential to the NYMEX natural gas futures contract for delivering gas to a specific location. Volumes of our basis contracts, along with volumes of our discounted index related purchase and sales contracts, included in the table above under "Prices provided by other external sources" and "Prices based on internal models or other valuation methods" are ~~94.1~~78.8 MMdts with a weighted average settlement price of ~~$(0.49)~~$(0.52) per dt.

•Fixed Price Gas Daily represents the price of a NYMEX natural gas futures contract adjusted for the difference in price for delivering the gas at another location. Volumes of our Fixed Price Gas Daily contracts included in the table above under "Prices provided by other external sources" are ~~36.4~~63.9 MMdts with a weighted average settlement price of ~~$1.64~~$2.06 per dt.

•Volumes of electric included in the table above under "Prices based on internal models or other valuation methods" are ~~less than 0.1 MMmwh with a weighted average settlement price of $33.07 per mwh.~~not material.

A reconciliation of SJI’s estimated net fair value of energy-related derivatives follows (in thousands):


Net Derivatives — Energy Related Assets, January 1, ~~2020~~2021	$	~~9,964~~16,421
Contracts Settled During the ~~Six~~Three Months Ended ~~June 30, 2020,~~March 31, 2021, Net	~~(7,048)~~(4,508)
Other Changes in Fair Value from Continuing and New Contracts, Net	~~9,227~~9,057

Net Derivatives — Energy Related Assets, ~~June 30, 2020~~March 31, 2021	$	~~12,143~~20,970

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Interest Rate Risk — Our exposure to interest-rate risk relates to short-term and long-term variable-rate borrowings. Variable-rate debt outstanding, including short-term and long-term debt, at ~~June 30, 2020~~March 31, 2021 was ~~$652.8~~$196.2 million and averaged ~~$1.0 billion~~$531.7 million during the first ~~six~~three months of ~~2020.~~2021. A hypothetical 100 basis point (1%) increase in interest rates on our average variable-rate debt outstanding would result in a ~~$7.7~~$3.9 million increase in our annual interest expense, net of tax. The 100 basis point increase was chosen for illustrative purposes, as it provides a simple basis for calculating the impact of interest rate changes under a variety of interest rate scenarios. Over the past five years, the change in basis points (b.p.) of our average monthly interest rates from the beginning to end of each year was as follows: 2020 - 152 b.p. decrease; 2019 - 64 b.p. decrease; 2018 - 91 b.p. increase; 2017 - 82 b.p. increase; and 2016 - 47 b.p. ~~increase; and 2015 - 14 b.p.~~ increase. At ~~June 30, 2020,~~March 31, 2021, our average interest rate on variable-rate debt was ~~2.15%~~1.27%.

~~Table of Contents~~

We typically issue long-term debt either at fixed rates or use interest rate derivatives to limit our exposure to changes in interest rates on variable rate, long-term debt. As of ~~June��30, 2020,~~March 31, 2021, the interest costs on ~~$2.5~~$2.95 billion of our long-term debt (including current portion) was either at a fixed rate or hedged via an interest rate derivative.

As of ~~June 30, 2020,~~March 31, 2021, SJI’s active interest rate swaps were as follows:

Notional Amount

Fixed Interest Rate

Start Date

Maturity

Obligor

Notional Amount

Fixed Interest Rate

Start Date

Maturity

20,000,000

3.049%

3/15/2017

3/15/2027

SJI

12,500,000

3.530%

12/1/2006

2/1/2036

20,000,000

3.049%

3/15/2017

3/15/2027

SJI

12,500,000

3.430%

12/1/2006

2/1/2036

10,000,000

3.049%

3/15/2017

3/15/2027

SJI

12,500,000

3.530%

12/1/2006

2/1/2036

SJG

12,500,000

3.430%

12/1/2006

2/1/2036

SJG

Credit Risk - As of ~~June 30, 2020,~~March 31, 2021, SJI had approximately ~~$10.5~~$6.1 million, or ~~24.1%~~11.1%, of the current and noncurrent Derivatives – Energy Related Assets transacted with ~~two counterparties. These counterparties are~~one counterparty. This counterparty is investment-grade rated.

As of ~~June 30, 2020,~~March 31, 2021, SJRG had ~~$45.0~~$119.5 million of Accounts Receivable under sales contracts. Of that total, ~~48.7%~~14.3% were with regulated utilities or companies rated investment-grade or guaranteed by an investment-grade-rated parent or were with companies where we have a collateral arrangement or insurance coverage. The remainder of the Accounts Receivable were within approved credit limits.

SJG:

The fair value and maturity of SJG's energy trading and hedging contracts determined using mark-to-market accounting as of ~~June 30, 2020~~March 31, 2021 are as follows (in thousands):


Assets	Assets							Assets
Source of Fair Value	Source of Fair Value	Maturity < 1 Year		Maturity 1 - 3 Years		Total		Source of Fair Value	Maturity < 1 Year		Maturity 1 - 3 Years		Total
Prices actively quoted	Prices actively quoted	$	225	$	144	$	369	Prices actively quoted	$	974	$	—	$	974
Prices provided by other external sources	Prices provided by other external sources	107		—		107		Prices provided by other external sources	6		—		6
Prices based on internal models or other valuable methods	Prices based on internal models or other valuable methods	4,366		—		4,366		Prices based on internal models or other valuable methods	3,402		—		3,402

Total	Total	$	4,698	$	144	$	4,842	Total	$	4,382	$	—	$	4,382


Liabilities	Liabilities							Liabilities
		Maturity		Maturity					Maturity		Maturity
Source of Fair Value	Source of Fair Value	< 1 Year		1 - 3 Years		Total		Source of Fair Value	< 1 Year		1 - 3 Years		Total
Prices actively quoted	Prices actively quoted	$	2,454	$	—	$	2,454	Prices actively quoted	$	338	$	275	$	613
Prices provided by other external sources	Prices provided by other external sources	196		—		196		Prices provided by other external sources	3		—		3
Prices based on internal models or other valuable methods	Prices based on internal models or other valuable methods	1		—		1		Prices based on internal models or other valuable methods	11		—		11

Total	Total	$	2,651	$	—	$	2,651	Total	$	352	$	275	$	627

Contracted volumes of SJG's NYMEX contracts are ~~9.8~~13.0 MMdts with a weighted-average settlement price of ~~$2.38~~$2.67 per dt. Contracted volumes of SJG's Basis contracts are ~~2.5~~12.5 MMdts with a weighted-average settlement price of ~~$0.26~~$0.10 per dt.

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A reconciliation of SJG's estimated net fair value of energy-related derivatives follows (in thousands):


Net Derivatives — Energy Related Assets, January 1, ~~2020~~2021	$	~~2,143~~1,082
Contracts Settled During the ~~Six~~Three Months ended ~~June 30, 2020,~~March 31, 2021, Net	~~(2,774)~~(862)
Other Changes in Fair Value from Continuing and New Contracts, Net	~~2,822~~3,535
Net Derivatives — Energy Related Assets, ~~June 30, 2020~~March 31, 2021	$	~~2,191~~3,755

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Interest Rate Risk - SJG's exposure to interest rate risk relates primarily to variable-rate borrowings. Variable-rate debt, including both short-term and long-term debt outstanding at ~~June 30, 2020,~~March 31, 2021, was ~~$160.5~~$24.9 million and averaged ~~$397.5~~$44.2 million during the first ~~six~~three months of ~~2020.~~2021. A hypothetical 100 basis point (1%) increase in interest rates on SJG's average variable-rate debt outstanding would result in a ~~$2.9~~$0.3 million increase in SJG's annual interest expense, net of tax. The 100 basis point increase was chosen for illustrative purposes, as it provides a simple basis for calculating the impact of interest rate changes under a variety of interest rate scenarios. Over the past five years, the change in basis points (b.p.) of SJG's average monthly interest rates from the beginning to end of each year was as follows: 2020 - 220 b.p. decrease; 2019 - 73 b.p. decrease; 2018 - 91 b.p. increase; 2017 - 91 b.p. increase; and 2016 - 19 b.p. ~~increase; and 2015 - 20 b.p.~~ increase. As of ~~June 30, 2020,~~March 31, 2021, SJG's average interest rate on variable-rate debt was ~~1.77%~~0.10%.

SJG typically issues long-term debt either at fixed rates or uses interest rate derivatives to limit exposure to changes in interest rates on variable-rate, long-term debt. As of ~~June 30, 2020,~~March 31, 2021, the interest costs on ~~$971.4 million~~$1.08 billion of long-term debt (including current portion) was either at a fixed-rate or hedged via an interest rate derivative.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The management of each of SJI and SJG, with the participation of their respective principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of SJI’s and SJG's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~June 30, 2020.~~March 31, 2021. Based on that evaluation, the principal executive officer and principal financial officer of each of SJI and SJG concluded that, as of ~~June 30, 2020,~~March 31, 2021, the disclosure controls and procedures employed at SJI and SJG, respectively, were effective.

Changes in Internal Control Over Financial Reporting

There was no change in SJI’s or SJG's internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended ~~June 30, 2020,~~March 31, 2021, that has materially affected, or is reasonably likely to materially affect, SJI’s and SJG's internal control over financial reporting.

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PART II — OTHER INFORMATION

Item l. Legal Proceedings

Information required by this Item for SJI and SJG is incorporated by reference to Part I, Item 1, Note 11, Litigation.

Item 1A. Risk Factors

Other than described below, there have been no material changes in the risk factors for SJI or SJG from those disclosed in Item 1A of SJI’s and SJG's Annual Reports on Form 10-K for the year ended December 31, ~~2019.~~2020.

~~Public health crises~~We issued additional securities in March and ~~epidemics or pandemics, such~~April 2021, and, as a ~~novel coronavirus, could materially~~result, we are subject to market risks including market demand for our debt and ~~adversely affect~~equity securities.

We have obtained financing which includes common stock and Equity Units.

Among other risks, the increase in our indebtedness may:

• make it more difficult for us to repay or refinance our debts as they become due during adverse economic and industry conditions;

• limit our flexibility to pursue other strategic opportunities or react to changes in our business and the industry in which we operate and, consequently, place us at a competitive disadvantage to competitors with less debt;

• require an increased portion of our cash flows from operations to be used for debt service payments, thereby reducing the availability of cash flows to fund working capital, capital expenditures, dividend payments and ~~financial condition.~~ ~~Our business could be materially and adversely affected by~~other general corporate purposes;

• result in a public health crisis or the widespread outbreak of contagious disease, such as the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19), which has been declared a pandemic by the World Health Organization in March 2020. In recent weeks, the continued spread of COVID-19 across the world has led to disruption and volatilitydowngrade in the global capital markets, which increases the cost of capital and adversely impacts access to capital. Additionally, our reliance on third-party suppliers, contractors, service providers, and commodity markets exposes us to possibility of delay or interruptioncredit rating of our ~~operations. For the duration of the outbreak of COVID-19, legislative and government action limits~~indebtedness, which could limit our ability to ~~collect~~borrow additional funds or increase the interest rates applicable to our indebtedness;

• result in higher interest expense in the event of increases in market interest rates for both long-term debt as well as short-term commercial paper, bank loans or borrowings under our line of credit at variable rates;

• reduce the amount of credit available to support hedging activities; and

• require that additional terms, conditions or covenants be placed on ~~overdue accounts,~~us.

Among other risks, the issuance of additional equity by SJI may:

• be dilutive to our existing shareholders and ~~prohibits us from shutting off services, which may cause a decrease in~~earnings per share;

• impact our ~~cash flows or net income. We have been executing our business continuity plans since the outbreak of COVID-19~~capital structure and are closely monitoring potential impacts due to COVID-19 pandemic responses at the state and federal level. As expected, we have incurred operating costs for emergency supplies, cleaning services, enabling technology and other specific needs during this crisis which have traditionally been recognized as prudent expenditures by our regulators. The effectscost of the ~~pandemic also may have a material adverse~~capital;

• be adversely impacted by movements in the overall equity markets or the utility or natural gas utility industry sectors of that market, which could impact onthe offering price of any new equity or necessitate the use of other equity or equity-like instruments such as preferred stock, convertible preferred shares, or convertible debt; and

• impact our ability to ~~collect accounts receivable~~make our current and future dividend payments, or make future dividend payments at similar amounts per share as customers face higher liquidity and solvency risks. Currently, the impact of the pandemic to the collectability of our accounts receivable is an unknown and continues to be monitored, but such receivables have traditionally been included in rate recovery. Our infrastructure investment programs continue to move forward, and construction activity that was delayed in accordance with directives from the Governor of New Jersey have since continued; however, to the extent the pandemic worsens or a similar directive is put in place in the future for a long period of time, our capital projects could be significantly impacted. It is impossible to predict the effect of the continued spread of the coronavirus in the communities we service. Should the coronavirus continue to spread or not be contained, our business, financial condition and results of operations could be materially impacted, including impairment of goodwill or access to capital markets, which in turn may have a negative effect on the market price of our common stock.

past.

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Item 6. Exhibits

(a) Exhibits


Exhibit No.						Description







1.1						~~ATM Equity Offering Sales~~Common Stock Underwriting Agreement dated asMarch 17, 2021 between South Jersey Industries, Inc. and the Representative of ~~April 6, 2020, for SJI~~the several underwriters (incorporated by reference from Exhibit 1.1 of Form 8-K of SJI as filed ~~April 6, 2020)~~March 22, 2021).

~~3.1~~1.2						~~SJI By-Laws effective April 24, 2020~~Equity Units Underwriting Agreement dated March 17, 2021 between South Jersey Industries, Inc. and the Representative of the several underwriters (incorporated by reference from Exhibit ~~3.1~~1.2 of Form 8-K of SJI as filed ~~April 29, 2020)~~March 22, 2021).

4.1						~~Second Supplemental~~Junior Subordinated Indenture dated as of April ~~16, 2020, for SJG~~23, 2018 between South Jersey Industries, Inc. and U.S. Bank National Association, as trustee (incorporated by reference from Exhibit 4.1 of Form 8-K of ~~SJG~~SJI as filed ~~April 20, 2020)~~March 22, 2021).

4.2						~~Form~~Second Supplemental Indenture dated as of ~~Senior Secured Note, Series F, 2020, Tranche A for SJG~~March 22, 2021 between South Jersey Industries, Inc. and U.S. Bank National Association, as trustee (incorporated by reference from Exhibit 4.2 of Form 8-K of ~~SJG~~SJI as filed ~~April 20, 2020)~~March 22, 2021).

~~4.3~~4 .3						Form of ~~Senior Secured Note,~~2021 Series ~~F, 2020, Tranche~~ B ~~for SJG~~1.65% Remarketable Junior Subordinated Notes due 2029 (incorporated by reference from Exhibit 4.3 of Form 8-K of ~~SJG~~SJI as filed ~~April 20, 2020)~~March 22, 2021).

~~4.4~~4 .4						~~Form~~Purchase Contract and Pledge Agreement dated as of ~~Senior Secured Note, Series F, 2020, Tranche C for SJG~~March 22, 2021 between South Jersey Industries, Inc. and U.S. Bank National Association, as purchase contract agent, collateral agent, custodial agent and securities intermediary (incorporated by reference from Exhibit 4.4 of Form 8-K of ~~SJG~~SJI as filed ~~April 20, 2020)~~March 22, 2021).

~~10.1(a)~~4.5						~~Credit~~Form of Remarketing Agreement ~~dated as of April 3, 2020, for SJI~~ (incorporated by reference from Exhibit ~~10.1~~4.5 of Form 8-K of SJI as filed ~~April 6, 2020)~~March 22, 2021).

~~10.1(b)~~4.6						~~Third~~Form of Corporate Units (incorporated by reference from Exhibit 4.6 of Form 8-K of SJI as filed March 22, 2021).

4.7						Form of Treasury Units (incorporated by reference from Exhibit 4.7 of Form 8-K of SJI as filed March 22, 2021).

4.8						Forward Sale Agreement dated March 17, 2021 between the Company and Bank of America, N.A., as forward purchaser (incorporated by reference from Exhibit 4.8 of Form 8-K of SJI as filed March 22, 2021).

4.9						Form of stock certificate for common stock (incorporated by reference from Exhibit 4.9 of Form 8-K of SJI as filed March 22, 2021).

4.10						Officer’s Certificate of South Jersey Industries, Inc., dated March 25, 2021, setting forth the terms of the Notes effective March 29, 2021 (incorporated by reference from Exhibit 4.1 of Form 8-K of SJI as filed March 26, 2021).

10.1						Fourth Amendment to Two-Year Revolving Credit Agreement and Extension Agreement, dated as of April ~~29, 2020, for ETG, ELK,~~26, 2021, by and ~~SJIU (Borrowers)~~among Elizabethtown Gas Company, SJI Utilities, Inc., the lenders party thereto and ~~SJI (Guarantor)~~JPMorgan Chase Bank, N.A., as administrative agent, including as Annex A thereto, a conformed copy of the Credit Agreement, as amended (incorporated by reference from Exhibit 10.1 of Form 8-K of SJI filed as ~~filed May 4, 2020)~~of April 30, 2021).

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~~10.1(c)~~		~~Note Purchase Agreement, dated as of May 27, 2020, for SJI (incorporated by reference from Exhibit 10.1 of Form 8-K of SJI as filed May 29, 2020).~~

~~10.1(d)~~	~~Note Purchase Agreement, dated as of April 16, 2020, for SJG (incorporated by reference from Exhibit 10.1 of Form 8-K of SJG as filed April 20, 2020).~~

31.1		Certification of SJI's Principal Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

31.2		Certification of SJI's Principal Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

31.3		Certification of SJG's Principal Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

31.4		Certification of SJG's Principal Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

32.1		Certification of SJI's Principal Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

32.2		Certification of SJI's Principal Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

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32.3						Certification of SJG's Principal Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

32.4						Certification of SJG's Principal Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

~~99.1~~						~~Third Amendment to the Note Purchase Agreement dated as of June 28, 2012, for SJI, dated as of May 27, 2020 (incorporated by reference from Exhibit 99.1 of Form 8-K of SJI as filed May 29, 2020).~~

~~99.2~~						~~Third Amendment to the Note Purchase Agreement dated as of August 16, 2017, for SJI, dated as of May 27, 2020 (incorporated by reference from Exhibit 99.2 of Form 8-K of SJI as filed May 29, 2020).~~

~~99.3~~						~~Second Amendment to the Note Purchase Agreement dated as of April 25, 2018, for SJI, dated as of May 27, 2020 (incorporated by reference from Exhibit 99.3 of Form 8-K of SJI as filed May 29, 2020).~~

101						The following financial statements from South Jersey Industries, Inc.’s Quarterly Report on Form 10-Q for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, filed with the Securities and Exchange Commission on ~~August 5, 2020~~May 6, 2021 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of ~~Income/(Loss);~~Income; (ii) the Condensed Consolidated Statements of Comprehensive ~~Income/(Loss);~~Income; (iii) the Condensed Consolidated Statements of Cash Flows; (iv) the Condensed Consolidated Balance Sheets; (v) the Condensed Consolidated Statements of Equity; and (vi) the Notes to Condensed Consolidated Financial Statements. The following financial statements from South Jersey Gas’ Quarterly Report on Form 10-Q for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, filed with the Securities and Exchange Commission on ~~August 5, 2020~~May 6, 2021 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Statements of Income; (ii) the Condensed Statements of Comprehensive Income; (iii) the Condensed Statements of Cash Flows; (iv) the Condensed Balance Sheets; and (v) the Condensed Statements of Equity.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SOUTH JERSEY INDUSTRIES, INC.

Dated:

~~August 5, 2020~~May 6, 2021

By:

/s/ Steven R. Cocchi

Steven R. Cocchi

Senior Vice President ~~Chief Strategy and Development Officer, and Interim~~& Chief Financial Officer

(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SOUTH JERSEY GAS COMPANY

Dated:

~~August 5, 2020~~May 6, 2021

By:

/s/ Steven R. Cocchi

Steven R. Cocchi

~~Treasurer~~Chief Financial Officer

(Principal Financial Officer)

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	June 30, 2020		December 31, 2019
Assets Held for Sale:
Current Assets	$	—	$	5,365
Net Utility Plant	19,335		18,692
Net Nonutility Property, Plant & Equipment	19,993		110,400
Goodwill	59		59
Regulatory Assets	638		415
Other Noncurrent Assets	19		8,509
Total Assets Held for Sale	$	40,044	$	143,440
Liabilities Held for Sale:
Current Liabilities	$	—	$	916
Asset Retirement Obligations	2,609		2,515
Regulatory Liabilities	3,246		2,583
Other Noncurrent Liabilities	7		29
Total Liabilities Held for Sale	$	5,862	$	6,043


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
SJI (includes SJG and all other consolidated subsidiaries):
Balance at beginning of period	$	8,277	$	16,061
Other Changes in Fair Value from Continuing and New Contracts, Net	6,553		4,285
Settlements	(4,870)		(10,386)

Balance at end of period	$	9,960	$	9,960

SJG:
Balance at beginning of period	$	1,706	$	4,928
Other Changes in Fair Value from Continuing and New Contracts, Net	2		1,708
Settlements	—		(4,928)

Balance at end of period	$	1,708	$	1,708


	Postretirement Liability Adjustment		Unrealized Gain (Loss) on Derivatives-Other (A)		Unrealized Gain (Loss) on Available-for-Sale Securities		Other Comprehensive Income (Loss) of Affiliated Companies		Total
Balance at April 1, 2020	$	(32,124)	$	(319)	$	(10)	$	(97)	$	(32,550)
Other comprehensive income before reclassifications	—		—		—		—		—
Amounts reclassified from AOCL	—		8		—		—		8
Net current period other comprehensive income	—		8		—		—		8
Balance at June 30, 2020	$	(32,124)	$	(311)	$	(10)	$	(97)	$	(32,542)


	As of June 30, 2020
	SJI Consolidated		SJG
2020 (excluding the six months ended June 30, 2020)	$	515	$	65
2021	534		39
2022	348		21
2023	190		19
2024	165		12
Thereafter	236		102
Total future minimum lease payments	1,988		258
Less imputed interest	109		29
Total lease payments	$	1,879	$	229
Included in the condensed consolidated balance sheet
Current lease liabilities (included in Other Current Liabilities)	$	759	$	80
Long-term lease liabilities (included in Other Noncurrent Liabilities)	1,120		149
Total lease liabilities	$	1,879	$	229


	Three Months Ended June 30, 2020 vs. 2019		Six Months Ended June 30, 2020 vs. 2019
SJI Utilities:
SJG Utility Operations	$	160	$	(314)
ETG Utility Operations	1,852		8,350
ELK Utility Operations	(179)		(105)
Subtotal SJI Utilities	1,833		7,931
Nonutility:
Energy Group:
Wholesale Energy Operations	64		118
Retail Electric Operations	38		(2)
Subtotal Energy Group	102		116
Energy Services:
On-Site Energy Production	(5,789)		(7,573)
Appliance Service Operations	(16)		99
Subtotal Energy Services	(5,805)		(7,474)
Midstream	229		228
Corporate & Services and Intercompany Eliminations	(311)		(5,223)
Total Operations Expense	$	(3,952)	$	(4,422)