Page 1 of 27
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998 Commission File Number 1-12899
SOUTH JERSEY GAS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 22-0398330
(State of incorporation) (IRS employer identification no.)
Number One South Jersey Plaza, Route 54, Folsom, NJ 08037
(Address of principal executive offices, including zip code)
(609) 561-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of August 5, 1998, there were 2,339,139 shares of the
registrant's common stock outstanding. All common shares are
owned by South Jersey Industries, Inc., the parent company of
South Jersey Gas Company.
Exhibit Index on page 27
- Cover Page -
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - See Pages 3 through 13
SJG-2
SOUTH JERSEY GAS COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED (LOSS) INCOME (UNAUDITED)
(In Thousands Except for Per Share Data)
Three Months Ended
June 30,
-----------------------------
1998 1997
------------ ------------
OPERATING REVENUES:
Utility $51,737 $57,822
Other 482 521
------------ ------------
Total Operating Revenues 52,219 58,343
------------ ------------
OPERATING EXPENSES:
Gas Purchased for Resale 30,426 31,951
Utility Operations 9,928 9,471
Other Operations 511 500
Maintenance 1,271 1,534
Depreciation 4,256 3,967
Federal Income Taxes (295) 486
State, Local and Other Taxes 2,066 5,277
------------ ------------
Total Operating Expenses 48,163 53,186
------------ ------------
OPERATING INCOME 4,056 5,157
------------ ------------
INTEREST CHARGES:
Long-Term Debt 2,944 3,916
Short-Term Debt 619 369
Other 127 110
------------ ------------
Total Interest Charges 3,690 4,395
------------ ------------
INCOME BEFORE PREFERRED DIVIDEND REQUIREMENTS 366 762
Preferred Stock Dividend Requirements 42 43
Preferred Securities Dividend Requirements 1,461 471
------------ ------------
NET (LOSS) INCOME APPLICABLE TO COMMON STOCK ($1,137) $248
============ ============
AVERAGE SHARES OF COMMON STOCK OUTSTANDING 2,339 2,339
============ ============
(LOSS) EARNINGS PER COMMON SHARE ($0.49) $0.11
============ ============
DIVIDENDS PAID PER COMMON SHARE $1.830 $1.635
============ ============
<FN>
The accompanying notes to the financial statements are an integral part
of these statements.
</FN>
SJG-3
SOUTH JERSEY GAS COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(In Thousands Except for Per Share Data)
Six Months Ended
June 30,
-----------------------------
1998 1997
------------ ------------
OPERATING REVENUES:
Utility $159,900 $183,888
Other 804 1,042
------------ ------------
Total Operating Revenues 160,704 184,930
------------ ------------
OPERATING EXPENSES:
Gas Purchased for Resale 91,601 101,821
Utility Operations 19,519 18,851
Other Operations 877 935
Maintenance 2,863 3,001
Depreciation 8,423 7,852
Federal Income Taxes 6,972 8,912
State, Local and Other Taxes 8,355 18,409
------------ ------------
Total Operating Expenses 138,610 159,781
------------ ------------
OPERATING INCOME 22,094 25,149
------------ ------------
INTEREST CHARGES:
Long-Term Debt 6,783 7,289
Short-Term Debt 1,116 1,722
Other 236 209
------------ ------------
Total Interest Charges 8,135 9,220
------------ ------------
INCOME BEFORE PREFERRED DIVIDEND REQUIREMENTS 13,959 15,929
Preferred Stock Dividend Requirements 84 86
Preferred Securities Dividend Requirements 2,192 471
------------ ------------
NET INCOME APPLICABLE TO COMMON STOCK $11,683 $15,372
============ ============
AVERAGE SHARES OF COMMON STOCK OUTSTANDING 2,339 2,339
============ ============
EARNINGS PER COMMON SHARE $4.99 $6.57
============ ============
DIVIDENDS PAID PER COMMON SHARE $3.465 $3.270
============ ============
<FN>
The accompanying notes to the financial statements are an integral part
of these statements.
</FN>
SJG-4
SOUTH JERSEY GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
June 30, December 31,
------------------------- -------------
1998 1997 1997
------------ ------------ -------------
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
Utility Plant, at original cost $642,846 $598,301 $619,489
Accumulated Depreciation (173,614) (163,267) (167,176)
Gas Plant Acquisition Adjustment - Net 1,888 1,963 1,926
------------ ------------ -------------
Property, Plant and Equipment - Net 471,120 436,997 454,239
------------ ------------ -------------
CURRENT ASSETS:
Cash and Cash Equivalents 2,686 3,274 6,596
Accounts Receivable:
Customers 23,227 27,571 25,303
Unbilled Revenues 3,102 3,552 17,263
Merchandise 2,293 1,854 1,977
Other 674 715 2,836
Provision for Uncollectibles (1,032) (1,032) (1,032)
Natural Gas in Storage, average cost 19,827 15,038 23,877
Materials and Supplies, average cost 4,244 4,046 4,509
Prepaid State and Local Taxes 15,345 10,980 566
Prepayments and Other Current Assets 2,336 1,995 1,661
------------ ------------ -------------
Total Current Assets 72,702 67,993 83,556
------------ ------------ -------------
ACCOUNTS RECEIVABLE - MERCHANDISE 1,384 1,852 1,449
------------ ------------ -------------
REGULATORY AND OTHER NON-CURRENT ASSETS:
Environmental Remediation Costs:
Expended - Net 21,301 17,060 21,041
Liability for Future Expenditures 50,697 52,400 52,400
Gross Receipts & Franchise Taxes 3,806 4,250 4,028
Income Taxes - Flowthrough Depreciation 13,510 14,488 13,999
Deferred Fuel Costs - Net 0 0 3,674
Deferred Postretirement Benefit Costs 5,837 5,705 6,150
Other 7,607 7,839 8,577
------------ ------------ -------------
Total Regulatory and Other Non-Current Assets 102,758 101,742 109,869
------------ ------------ -------------
TOTAL ASSETS $647,964 $608,584 $649,113
============ ============ =============
<FN>
The accompanying notes to the financial statements are an integral part of these statements.
</FN>
SJG-5
SOUTH JERSEY GAS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
June 30, December 31,
------------------------- -------------
1998 1997 1997
------------ ------------ -------------
CAPITALIZATION AND LIABILITIES
COMMON EQUITY:
Common Stock, Par Value $2.50 per share:
Authorized - 4,000,000 shares
Outstanding - 2,339,139 shares $5,848 $5,848 $5,848
Other Paid-In Capital and Premium on Common Stock 102,817 102,817 102,817
Retained Earnings 59,697 59,244 56,120
------------ ------------ -------------
Total Common Equity 168,362 167,909 164,785
------------ ------------ -------------
PREFERRED STOCK AND SECURITIES:
Redeemable Cumulative Preferred - Par Value $100 per share,
Authorized - 46,404, 47,304 and 47,304 shares, respectively
Outstanding:
Series A, 4.70%--2,100, 3,000 and 3,000 shares 210 300 300
Series B, 8.00%--19,242 shares 1,924 1,924 1,924
Company-Guaranteed Mandatorily Redeemable
Preferred Securities of Subsidiary Trust
Par Value $25 per share, 1,400,000 shares
Authorized and Outstanding 35,000 35,000 35,000
------------ ------------ -------------
Total Preferred Stock and Securities 37,134 37,224 37,224
------------ ------------ -------------
LONG-TERM DEBT 166,853 178,002 175,860
------------ ------------ -------------
Total Capitalization 372,349 383,135 377,869
------------ ------------ -------------
CURRENT LIABILITIES:
Notes Payable 72,300 14,500 45,900
Current Maturities of Long-Term Debt 8,876 8,876 8,876
Accounts Payable 20,074 26,530 45,623
Customer Deposits 5,815 5,918 5,871
Federal Income Taxes Accrued 694 2,886 514
State and Local Taxes Accrued 1,590 826 466
Environmental Remediation Costs 16,037 7,735 14,373
Interest Accrued and Other Current Liabilities 6,633 5,700 6,709
------------ ------------ -------------
Total Current Liabilities 132,019 72,971 128,332
------------ ------------ -------------
DEFERRED CREDITS AND OTHER NON-CURRENT
LIABILITIES:
Accumulated Deferred Income Taxes - Net 86,468 79,596 81,847
Investment Tax Credits 5,434 5,827 5,632
Deferred Revenues - Net 979 6,125 0
Pension and Other Postretirement Benefits 10,537 10,190 10,798
Environmental Remediation Costs 34,660 44,665 38,027
Other 5,518 6,075 6,608
------------ ------------ -------------
Total Deferred Credits and Other Non-Current Liabilities 143,596 152,478 142,912
------------ ------------ -------------
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES $647,964 $608,584 $649,113
============ ============ =============
<FN>
The accompanying notes to the financial statements are an integral part of these statements.
</FN>
SJG-6
SOUTH JERSEY GAS COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In Thousands)
Six Months Ended
June 30,
-----------------------------
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income Applicable to Common Stock $11,683 $15,372
Adjustments to Reconcile Net Income to Cash Flows Provided by
Operating Activities:
Depreciation and Amortization 9,388 8,803
Provision for Losses on Accounts Receivable 454 417
Revenues and Fuel Costs Deferred - Net 4,653 6,529
Deferred and Non-Current Federal Income Taxes and Credits - Net 4,582 1,624
Environmental Remediation Costs - Net (260) (1,494)
Changes in:
Accounts Receivable 17,629 15,247
Inventories 4,315 7,609
Prepayments and Other Current Assets (675) (433)
Accounts Payable and Other Accrued Liabilities (25,501) (14,975)
State and Local Taxes Accrued (13,655) (9,099)
Other - Net (30) 2,373
------------ ------------
Net Cash Provided by Operating Activities 12,583 31,973
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, Cost of Removal and Salvage (25,663) (23,575)
------------ ------------
Net Cash Used in Investing Activities (25,663) (23,575)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings from (Repayments of) Lines of Credit 26,400 (93,800)
Proceeds from Issuance of Long-Term Debt 0 35,000
Principal Repayments of Long-Term Debt (9,007) (4,461)
Dividends of Common Stock (8,106) (7,650)
Repurchase of Preferred Stock (90) (90)
Proceeds from Sale of Preferred Securities 0 35,000
Payments for Issuance of Long-Term Debt and Preferred Securities (27) (2,215)
Additional Investment by Shareholder 0 25,623
------------ ------------
Net Cash Provided by (Used in) Financing Activities 9,170 (12,593)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,910) (4,195)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,596 7,469
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,686 $3,274
============ ============
<FN>
The accompanying notes to the financial statements are an integral part of these statements.
</FN>
SJG-7
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies:
The Entity
The condensed consolidated financial statements present the
accounts of South Jersey Gas Company (SJG) and its wholly owned
statutory trust subsidiary, SJG Capital Trust. South Jersey
Industries, Inc. (SJI) owns all of SJG's outstanding common
stock. SJG made some reclassifications of previously reported
amounts to conform with classifications for the current year.
Estimates and Assumptions
SJG prepares its financial statements to conform with
generally accepted accounting principles. This requires the
company to make estimates and assumptions affecting the amounts
reported in the financial statements and related disclosures.
Therefore, actual results may differ from those estimates.
Regulation
SJG is subject to the rules and regulations of the New Jersey
Board of Public Utilities (BPU) and maintains its accounts in
accordance with the prescribed Uniform System of Accounts of
that Board (See Note 2).
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB)
issued FASB No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is also effective for
fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting selected information about
operating segments in the company's interim and annual financial
statements. SJG is evaluating whether adopting this statement
will change its presentation of financial information. SJG
adopted FASB No. 131 effective January 1, 1998; however, as
permitted by this statement, the company will not report segment
information in interim financial statements until 1999.
State and Local Taxes
New Jersey adopted legislation reforming energy taxation
effective July 14, 1997. The new law eliminated the Gross
Receipts & Franchise Tax (GRAFT), amounting to approximately 13%
of utility revenue, and replaced it with a combination of taxes.
Beginning January 1, 1998, retail sales of natural gas and
electricity and utility services, including transportation, are
subject to the 6% State Sales and Use Tax (SUT). Gas and
SJG-8
electric utilities are also subject to the 9% State Corporation
Business Tax (CBT) on income before taxes. To bridge the
revenue gap created by the new tax law, the State imposed a
Transitional Energy Facilities Assessment (TEFA) on volumes of
gas sold and transported. The TEFA will be phased out over five
years beginning January 1, 1999 and ending January 1, 2003. The
revised tax policy is expected to eliminate tax differences
between utility and nonutility suppliers, providing fair
competition and lower energy costs for consumers. Adopting the
new legislation does not materially affect SJG's financial
position, operating results or liquidity (See Note 2). However,
since the SUT is not included in reported utility revenues or
tax expense as GRAFT was previously, there are equal reductions
in these line items on the Condensed Statements of Consolidated
Income.
Note 2. Regulatory Matters:
On July 31, 1996 and 1997, SJG filed with the BPU to recover
remediation costs expended from August 1995 through July 1997
totaling $1.6 million. Both filings were subsequently updated
and are still pending at the BPU (See Note 6).
On January 27, 1997, the BPU granted SJG a total rate increase
of $10.3 million. The $6.0 million base rate portion of the
increase was based on a 9.62% rate of return on rate base, which
included an 11.25% return on common equity. The majority of
this increase comes from residential and small commercial
customers. Part of the increase is recovered from new
miscellaneous service fees which charge specific customers for
costs they cause SJG to incur. Additionally, SJG's threshold
for sharing pre-tax margins generated by interruptible and
off-system sales and transportation was increased from $4.0
million to $5.0 million. SJG keeps 100% of pre-tax margins up
to this level and 20% of such margins above that level. Later
in 1997, the $5.0 million threshold was increased by $500,000
which is the annual revenue requirement associated with the
completion of construction on a specified pipeline
interconnection. In late 1998, this $5.5 million threshold will
increase by another $1.9 million, also representative of the
annual revenue requirement associated with major construction
projects.
As part of the tariff changes approved in the rate case, SJG
began its pilot program in April 1997, giving residential
customers a choice of gas supplier. During the enrollment
period, which ended June 30, 1997, nearly 13,000 residential
customers applied for this service. SJG began transporting gas
for these customers on August 1, 1997. Participant's bills are
reduced for cost of gas charges and applicable taxes. The
resulting decrease in revenues is offset by a corresponding
decrease in gas costs and taxes under SJG's BPU-approved fuel
clause. On June 26, 1998, the BPU expanded the number of
participants to 25,000. The program results in a reduction in
Utility Revenues. However, the program does not affect
the company's net income, financial condition or margins. Also,
SJG further expanded the choices available to commercial and
industrial customers, including a new transportation tariff
providing savings to qualified customers.
SJG-9
On May 13, 1997, SJG filed to recover additional
postretirement benefit costs of approximately $1.3 million
annually. This recovery was approved on December 17, 1997, and
began January 1, 1998.
On September 9, 1997, SJG filed with the BPU to adjust rates
by replacing the GRAFT with SUT, CBT and TEFA components. The
new rates became effective January 1, 1998 on an interim basis
and were made final effective July 13, 1998.
In September 1996, SJG filed to reduce its rates through its
1996-1997 Levelized Gas Adjustment Clause (LGAC) reflecting a
$1.4 million decrease in natural gas costs. Updated results
from the 1996-1997 LGAC year were rolled into the 1997-1998 LGAC
which was filed with the BPU in September 1997.
On September 12, 1997, SJG made its annual LGAC, Temperature
Adjustment Clause (TAC) and Demand Side Management Clause (DSMC)
filings with the BPU. The LGAC and the DSMC cover the period
November 1997 through October 1998. The TAC period runs from
October 1 through May 31. In this filing, the company requested
a $4.7 million increase in the annual LGAC recovery which
includes the 1996-1997 LGAC year results referred to above. SJG
updated this amount to $7.5 million in May 1998 due to increased
actual gas costs as compared to original projections filed with
the BPU. The company also requested resolution of the 1996-1997
filing along with this filing. Both filings are still pending
at the BPU.
On March 5, 1998, the BPU approved new rates related to
appliance service, including a profit margin. The new rates are
competitive with those of other service providers in New Jersey
and are designed to increase earnings and cash flows to SJG over
the current rates. The BPU also authorized SJG to institute new
appliance service contract plans and an electric air
conditioning repair charge in April 1998.
Note 3. Related Party Transactions:
SJG contracted with R&T Group, Inc. (R&T), SJI's wholly owned
subsidiary, for general utility construction and environmental
remediation services costing approximately $75,100 for the three
months ended and $1,901,000 for the six months ended June 30,
1997. The amounts payable to R&T relating to these services
were $136,600 at June 30, 1997. SJG discontinued the operations
and sold the assets of R&T during the first half of 1997.
SJG sells natural gas for resale to South Jersey Energy
Company (SJE), SJI's wholly owned subsidiary. These sales
comply with Section 284.402 of the Regulations of the Federal
Energy Regulatory Commission (FERC). Sales to SJE were approximately
$160,600 for the three months ended and $292,900 for the six
months ended June 30, 1998.
SJG-10
Note 4. State, Local and Other Taxes:
The total expense for state, local and other taxes reflected
in the Condensed Statements of Consolidated Income for the three
and six months ended June 30, 1998 and 1997 are shown below (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
CBT - Net $72 $0 $2,479 $0
TEFA 1,148 0 4,361 0
GRAFT 110 4,544 (97) 16,727
Other Taxes 736 733 1,612 1,682
---------- ---------- ---------- ----------
Total State, Local and
Other Taxes $2,066 $5,277 $8,355 $18,409
========== ========== ========== ==========
During the three and six months ended June 30, 1998, SJG
recorded an additional $2.6 million and $7.6 million,
respectively, for SUT on utility services through its Condensed
Consolidated Balance Sheet which does not impact reported
revenues or tax expense (See Note 1).
Note 5. Capitalization:
SJG's First Mortgage Indenture, as supplemented, restricts the
company as to the amount of cash dividends or other
distributions it may pay on its common stock. SJG had
approximately $57.8 million in retained earnings at June 30,
1998 that were free of these restrictions.
On March 26, 1997, SJG received $25.6 million in contributions
of capital from SJI. SJG credits capital contributions to Other
Paid-In Capital and Premium on Common Stock. SJG made no other
changes in common stock during 1998 and 1997.
Note 6. Commitments and Contingencies:
Construction Commitments
SJG estimates the cost of construction and environmental
remediation programs for the company in 1998 will total $72.0
million. SJG has made certain commitments regarding these
programs.
SJG-11
Gas Supply Contracts
SJG has entered into long-term contracts for natural gas
supplies, firm transportation, and firm gas storage service.
The earliest that any of the gas supply contracts expires is
1999. All of the transportation and storage service agreements
between SJG and its interstate pipeline suppliers were made
under FERC approved tariffs. SJG's cumulative obligation for
demand charges and reservation fees paid to its suppliers for all
of these services is approximately $4.9 million per month. SJG
recovers this on a current basis through the LGAC.
Pending Litigation
SJG is subject to claims which arise in the ordinary course of
business and other legal proceedings. The company sets up
reserves when these claims become apparent. SJG also maintains
insurance and records probable insurance recoveries relating to
outstanding claims.
A group of Atlantic City casinos filed a petition with the BPU
in 1996 alleging overcharges of over $10.0 million, including
interest. Management believes that charges to the casinos were
based on applicable SJG tariffs and that the casinos were not
qualified under less expensive rate schedules, as claimed.
Management believes that the ultimate impact of these actions
will not materially affect the company's financial position,
operating results or liquidity.
Environmental Remediation Costs
SJG incurred and recorded costs for environmental cleanup of
sites where SJG or predecessor companies operated gas
manufacturing plants. The company terminated manufactured gas
operations at all sites more than 35 years ago.
Since the early 1980s, SJG has recorded environmental cleanup
costs of $90.8 million. The company has spent $40.1 million as
of June 30, 1998. SJG, with the assistance of an outside
consulting firm, estimates that future costs to clean up the
sites will range from $50.7 million to $150.6 million. The
company recorded the lower end of this range as a liability.
It is reflected on the Condensed Consolidated Balance Sheet
under the captions "Current Liabilities" and "Deferred Credits
and Other Non-Current Liabilities." SJG's recorded
environmental cleanup costs do not directly affect earnings
because the company defers and recovers them through rates over
7-year amortization periods as allowed by the BPU. SJG did not
adjust the accrued liability for future insurance recoveries,
which the company is pursuing. SJG received $4.2 million of
insurance recoveries as of June 30, 1998. The company used
these proceeds to offset related legal fees and to reduce the
balance of deferred environmental remediation costs. Recorded
amounts include estimated costs based on projected investigation
and remediation work plans using existing technologies. Actual
SJG-12
costs could differ from the estimates due to the long-term
nature of the projects, changing technology, government
regulations and site specific requirements.
As a result of the 7-year Remediation Adjustment Clause (RAC)
recovery mechanism, the company does not expense environmental
remediation costs when incurred. Rather, it defers costs to be
recovered. SJG has two regulatory assets associated with
environmental cost. The first regulatory asset is titled
"Environmental Remediation Cost: Expended - Net." These
expenditures represent what the company actually spent to clean
up former gas manufacturing plant sites. These costs meet the
requirements of FASB No. 71, "Accounting for the Effects of
Certain Types of Regulation." The BPU allowed SJG to recover
these expenditures through July 1995 and petitions to recover
these costs through July 1997 are pending (See Note 2).
The other regulatory asset titled "Environmental Remediation
Cost: Liability for Future Expenditures" relates to estimated
future expenditures determined under the guidance of FASB No. 5,
"Accounting for Contingencies." SJG recorded this amount, which
relates to former manufactured gas plant sites, as a deferred
debit with the corresponding amount reflected in Current
Liabilities and Deferred Credits and Other Non-Current
Liabilities. The deferred debit is a regulatory asset under
FASB No. 71 because the BPU's intent, as evidenced by its
current practice, is to allow SJG to recover the deferred costs
after they are expended.
SJG files with the BPU to recover these costs in rates through
its RAC. The BPU has consistently allowed the full recovery
over 7-year periods, and SJG believes this will continue. As of
June 30, 1998, the company's unamortized cleanup costs of $21.3
million are reflected on the balance sheet under the caption
"Regulatory and Other Non-Current Assets." Since BPU approval
of the RAC in August 1992, the company has recovered $14.6
million through rates as of June 30, 1998 (See Note 2).
Note 7. Subsequent Event:
On July 10, 1998, SJG filed a petition with the BPU requesting
authority to establish a Medium Term Note (MTN) program. The
petition requests authority to issue $100 million of MTN's
through December 2001. The net proceeds of this MTN program
will be used to retire short-term debt and to fund capital
expenditures.
SJG-13
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Overview
South Jersey Gas Company (SJG) is a natural gas distribution
company serving 263,678 customers at June 30, 1998, compared
with 257,449 customers at June 30, 1997. SJG also makes
off-system sales of natural gas on a wholesale basis to various
customers on the interstate pipeline system and transports
natural gas purchased directly from producers or suppliers for
its own sales and for some of its customers. South Jersey
Industries, Inc. owns all of the common stock of SJG.
Forward-Looking Statements
This report contains certain forward-looking statements
concerning projected future financial performance, future
operating performance, future plans and courses of action and
future economic conditions. All statements in this report other
than statements of historical fact are forward-looking
statements. These forward-looking statements are made based
upon management's expectations and beliefs concerning future
events impacting the company and therefore involve a number of
risks and uncertainties. Management cautions that
forward-looking statements are not guarantees and that actual
results could differ materially from those expressed or implied
in the forward-looking statements.
There are a number of factors that could cause the company's
actual results to differ materially from those anticipated,
which include, but are not limited to, the following: general
economic conditions on an international, federal, state and
local level; weather conditions in the company's marketing
areas; regulatory and court decisions; competition in the
company's regulated activities; the availability and cost of
capital; costs and effects of unanticipated legal proceedings
and environmental liabilities; and changes in business
strategies.
Competition
SJG's franchises are non-exclusive. Currently no other utility
provides retail gas distribution services within its territory.
SJG does not expect other utilities to do so in the foreseeable
future because of the extensive investment required for utility
plant and related costs. SJG competes with oil, propane and
electricity suppliers for residential, commercial and industrial
users. The market for natural gas sales is subject to
competition as a result of deregulation. SJG has enhanced its
competitive position while maintaining its margins by using an
unbundled tariff which allows the company to recover its full
cost of service, except for the variable cost of the gas
commodity, when engaging in the transportation of gas for its
customers. Under this tariff, SJG derives substantially all of
its profits from the transportation rather than the sale of the
commodity. SJG's commercial and industrial customers can choose
their supplier while SJG recovers its cost of service and fixed
SJG-14
gas costs primarily through its transportation service. In
April 1997, SJG initiated its New Jersey Board of Public
Utilities (BPU) approved pilot program giving some residential
customers a choice of gas suppliers (See Pilot Program - Choice
of Gas Supplier). SJG believes it has been a leader in
addressing the changing marketplace, while maintaining its focus
on being a low-cost provider of natural gas and energy services.
Pilot Program - Choice of Gas Supplier
In April 1997, SJG initiated its BPU-approved pilot program
giving residential customers a choice of gas supplier. During
the initial enrollment period, which ended June 30, 1997, nearly
13,000 residential customers applied for this service. In June
1998, the duration of the pilot program was extended to July 31,
1999 and the scope was approximately doubled to 25,000 customers
(See Regulatory Matters). Participants' bills are reduced for
certain cost of gas charges and applicable taxes. The resulting
decrease in revenues is offset by a corresponding decrease in
SJG's gas costs and taxes under SJG's BPU-approved fuel clause.
The program does not affect its net income, financial condition
or margins.
Energy Adjustment Clauses
SJG's tariff includes a Levelized Gas Adjustment Clause (LGAC),
a Temperature Adjustment Clause (TAC), a Remediation Adjustment
Clause (RAC) and a Demand Side Management Clause (DSMC). These
clauses permit adjustments for changes in gas supply costs,
reduce the impact of extreme fluctuations in temperatures on SJG
and its customers, recover costs for the remediation of former
gas manufacturing plants and recover costs associated with its
conservation plan, respectively. The BPU-approved LGAC, RAC and
DSMC adjustments are made to match revenues and expenses. TAC
adjustments do affect revenue, income and cash flows since
extremely cold weather can generate credits to customers, while
extremely warm weather during the winter season can result in
additional billings to customers. TAC adjustments related to
the 1997-1998 TAC year did not materially impact the financial
statements for 1998.
Status of Year 2000 Conversion
The company prepared a Year 2000 Impact and Assessment study
and developed a plan for program modification. An outside
service was used to identify both informational and logic date
variables within the programming codes. This service was
completed and expensed in 1997. Presently, the company is
revising the affected programming codes. As of June 30, 1998,
approximately 38% of the programming code was revised. All
revisions are scheduled to be completed by early 1999, providing
the remainder of 1999 for testing. The conversion costs are
estimated at $0.4 million of which approximately $0.15 million
was spent as of June 30, 1998. Vendors who provide third party
software have been contacted and 26 of 35 have indicated that
they are now compliant. The company is also in the process of
securing written verification from its key product and service
vendors to ensure their compliance. Based upon the nature of
SJG's operating and information systems and the current advanced
state of planning and remediation, the company does not
anticipate any material difficulty in completing full year 2000
compliance and that any problems that do arise are expected to be
immaterial or insignificant.
SJG-15
Results of Operations - Three and Six Months Ended June 30, 1998
Compared to Three and Six Months Ended June 30, 1997
Operating Revenues
Revenues decreased $6.1 million for the second quarter and
$24.2 million for the first six months of 1998 as compared to
the same periods in 1997. These decreases were primarily due to
lower firm sales resulting from weather which was warmer than
1997 and state tax reform which lowered the tax component
contained in reported revenue, effective January 1, 1998, with
an offsetting reduction in State, Local and Other Taxes (See
Notes 1 and 4). Weather in 1998 was 29.1% and 16.0% warmer for
the three and six month periods, respectively, compared with the
prior year periods. Also, increased firm transportation service
replaced firm sales. These results were partially offset by
increased customer growth in both periods and off-system sales
for the six month period. The revenue from transportation
excludes commodity costs (See Competition). As SJG's profits
are from the transportation rather than the sale of commodity,
the migration of customers to firm transportation does not lower
SJG's margin. Total sales margin decreased in 1998 due to lower
sales volumes and decreased margins on off-system sales,
partially offset by the effect of the addition of 6,200 new
customers since the end of the second quarter of 1997.
Gas Purchased for Resale
Gas purchased for resale decreased $1.5 million in the second
quarter of 1998 compared with the 1997 quarter principally due
to decreased sales volumes. For the six months ended June 30,
1998, gas purchased for resale decreased $10.2 million compared
with 1997 principally due to decreased sales volumes. Decreased
sales volumes for both periods were primarily caused by warmer
temperatures. Sources of gas supply include both contract and
open-market purchases. SJG is responsible for securing and
maintaining its own gas supplies to serve its customers.
SJG has entered into long-term contracts for natural gas
supplies, firm transportation, and firm gas storage service.
The earliest expiration of any of these contracts is 1999. All
of the transportation and storage service agreements between SJG
and its interstate pipeline suppliers are provided under tariffs
approved by the Federal Energy Regulatory Commission. SJG's
cumulative obligation for demand charges and reservation fees
for all of these services is approximately $4.9 million per
month, which is recovered on a current basis through its LGAC.
Operations
A summary of net changes in utility operations for 1998
compared with 1997 is as follows (in thousands):
SJG-16
Period Ended June 30,
-----------------------------
Three Months Six Months
1998 vs. 1997 1998 vs. 1997
------------- -------------
Other Production Expense $7 $3
Transmission 6 19
Distribution (78) (209)
Appliance Service 244 228
Customer Accounts and Services 124 285
Sales 4 (9)
Administration and General 150 351
Other 11 (58)
------------- -------------
$468 $610
============= =============
Distribution costs decreased for both comparative periods in
1998 principally due to decreased meter exchange activity.
Appliance Service expenses increased in the comparisons due to
expenditures on advertising. Customer Accounts and Services
costs increased in 1998 principally due to an increase in
payroll expense. Administrative and General costs increased in
1998 principally due to increased employee benefits costs.
Other Operating Expenses
A summary of principal changes in other operating expenses for
1998 compared with 1997 is as follows (in thousands):
Period Ended June 30,
-----------------------------
Three Months Six Months
1998 vs. 1997 1998 vs. 1997
------------- -------------
Maintenance ($263) (138)
Depreciation 289 571
Federal Income Taxes (781) (1,940)
State, Local and Other Taxes (3,211) (10,054)
The decrease in maintenance expense is principally due to
utility production plant maintenance, which includes the
amortization of environmental remediation costs (such decreases
are offset by lower revenue recovery under SJG's RAC).
Depreciation is higher principally due to increased investment
in property, plant and equipment. Federal Income Tax changes
SJG-17
reflect the impact of changes in pre-tax income. State, Local
and Other Taxes decreased because of the energy tax reform
legislation discussed under Operating Revenues - Utility.
Interest Charges
Interest charges decreased in 1998 by $.7 million and $1.1
million for the three and six month periods, respectively,
versus the comparable 1997 periods. Interest charges were
reduced for the quarter due to carrying lower levels of
long-term debt outstanding partially offset by higher levels of
short-term debt outstanding. Interest charges were reduced for
the six month period due to lower levels of short-term and
long-term debt outstanding. Short-term debt levels were reduced
by the application of a $25.6 million cash equity infusion to
SJG from SJI and the application of the net proceeds from the
sale of the Mandatorily Redeemable Preferred Securities in May
1997.
Preferred Securities Dividend Requirements
Preferred Dividends increased in 1998 due to the issuance of
$35.0 million of 8.35% SJG-guaranteed Mandatorily Redeemable
Preferred Securities in May 1997 (See Capital Resources).
Net Income Applicable to Common Stock
The details affecting net income and earnings per common share
are discussed under the appropriate captions above.
Liquidity
The seasonal nature of gas operations, the timing of
construction and remediation expenditures and related permanent
financing, as well as mandated tax and sinking fund payment
dates require large short-term cash requirements. These are
generally met by cash from operations and short-term lines of
credit. The company maintains short-term lines of credit with a
number of banks, aggregating $100.0 million of which $27.7
million was available at June 30, 1998. The credit lines are
uncommitted and unsecured with interest rates below the prime
rate.
The changes in cash flows from operating activities are as
follows (in thousands):
SJG-18
Six Months Ended
June 30,
1998 vs. 1997
-------------
Increases/(Decreases):
Net Income ($3,689)
Depreciation and Amortization 585
Provision for Losses on Accts Receivable 37
Revenues and Fuel Costs Deferred - Net (1,876)
Deferred and Non-Current Federal
Income Taxes and Credits - Net 2,958
Environmental Remediation Costs - Net 1,234
Accounts Receivable 2,382
Inventories (3,294)
Prepayments and Other Current Assets (242)
Accounts Payable and Other Accrued
Liabilities (10,526)
State and Local Taxes Accrued (4,556)
Other - Net (2,403)
-------------
Decrease in Net Cash from Operating
Activities ($19,390)
=============
Depreciation and Amortization are non-cash charges to income
and do not impact cash flow. Changes in depreciation cost
reflect the effect of additions and reductions to fixed assets.
Increases in Revenues and Fuel Costs Deferred - Net reflect the
impact of overcollection of fuel costs or the recovery of
previously deferred fuel costs. Decreases reflect the impact of
payments or credits to customers for amounts previously
overcollected and the undercollection of fuel costs resulting
from increases in natural gas costs.
Increases in Deferred and Non-Current Federal Income Taxes and
Credits - Net represent the excess of taxes accrued over amounts
paid. Decreases reflect the impact of taxes paid in excess of
amounts accrued. Generally, deferred income taxes related to
deferred fuel costs will be paid in the next year.
Changes in Environmental Remediation Costs - Net represent the
difference between remediation expenditures and amounts
collected under the RAC and insurance recoveries.
Changes in Accounts Receivable are generally weather and price
related. Changes impact cash flows when collected in subsequent
periods.
Changes in Inventories reflect the impact of seasonal
requirements, temperatures and price changes.
SJG-19
Changes in Accounts Payable and Other Accrued Liabilities
principally reflect a change in gas inventory purchasing
practices mandated by the BPU and the impact of timing
differences between the accrual and payment of costs.
Changes in State and Local Taxes Accrued reflect the impact of
changes between taxes paid and taxes accrued. However,
significant timing differences exist in cash flows during the
year. In 1997, SJG paid the full year's Gross Receipts &
Franchise Tax (GRAFT) on April 1 and amortized the remaining
prepaid tax over the remainder of the year on the basis of gas
volumes sold.
As stated in Note 1, on January 1, 1998, the GRAFT was replaced
with a 6% State Sales and Use Tax (SUT), a 9% State Corporate
Business Tax (CBT) on income before taxes and a Transitional
Energy Facilities Assessment (TEFA) on volumes of gas sold and
transported. The TEFA will be phased out over five years
beginning January 1, 1999. Approximately 50% of the new taxes
are paid in monthly installments during the first six months of
the year and the principal portion of the remaining taxes are
paid on June 25, 1998, and on May 15 of each year thereafter.
SJG uses short-term borrowings to make these tax payments which
result in a temporary increase in the short-term debt level.
Regulatory Matters
Rate Actions
On January 27, 1997, the BPU granted SJG a total rate increase
of $10.3 million. The $6.0 million base rate portion of the
increase was based on a 9.62% rate of return on rate base, which
included an 11.25% return on common equity. The majority of
this increase comes from residential and small commercial
customers. Part of the increase is recovered from new
miscellaneous service fees which charge specific customers for
costs they cause SJG to incur. Additionally, SJG's threshold
for sharing pre-tax margins generated by interruptible and
off-system sales and transportation was increased from $4.0
million to $5.0 million. SJG keeps 100% of pre-tax margins up
to this level and 20% of such margins above that level. Later
in 1997, the $5.0 million threshold was increased by $500,000
which is the annual revenue requirement associated with the
completion of construction on a specified pipeline
interconnection. In late 1998, this $5.5 million threshold will
increase by another $1.9 million, also representative of the
annual revenue requirement associated with major construction
projects.
Rates of return are calculated by weighting SJG's individual
capital cost rates by the proportion of each respective type of
capital. This requires selecting appropriate capital structure
ratios and determining the cost rate for each capital component
as determined in each rate proceeding.
SJG-20
In setting a rate of return, the BPU must provide a utility and
its investors with a return that is commensurate with the risk
to which the invested capital is exposed so that the utility has
access to the capital required to meet its public service
responsibility.
Also on January 27, 1997, the BPU approved SJG's request for a
$2.5 million revenue reduction through the TAC. This is the
standard BPU procedure used to credit customers with previously
collected revenues which were in excess of those allowed by the
TAC (See Energy Adjustment Clauses). This revenue reduction
reflects the TAC's normal operation, as does the BPU's
confirmation of the decrease.
On September 9, 1997, SJG filed with the BPU to adjust rates by
replacing the current State Gross Receipts and Franchise Tax
components with a SUT, a CBT and a TEFA (See "Liquidity").
Interim rates reflecting this change became effective January 1,
1998. Final rates were approved on July 13 , 1998.
In September 1996, SJG filed to reduce its rates through its
1996-1997 LGAC reflecting a $1.4 million decrease in natural gas
costs. Updated results from the 1996-1997 LGAC year were rolled
into the 1997-1998 LGAC which was filed with the BPU in
September 1997.
The 1997-1998 LGAC filing requested a rate increase to reflect
an increase of $4.7 million in natural gas costs, inclusive of
the 1996-1997 LGAC filing. This amount was updated to $7.5
million in May 1998. Both filings are still pending at the BPU.
On September 12, 1997, SJG also filed its 1997-1998 TAC with
the BPU. For the TAC period ended May 31, 1997, temperatures were
within the TAC range and no adjustment to customers' bills was
required. SJG experienced warmer than normal weather during the TAC
period running from October 1, 1997 through May 31, 1998. The warmer
weather decreased net income in 1998 by approximately $3.7 million.
SJG anticipates filing its 1998-1999 TAC with the BPU in August 1998.
SJG will seek recovery of approximately $416,000 of revenues from its
firm customers resulting from warmer than normal temperatures. In
addition, SJG filed a petition with the BPU on June 8, 1998 requesting
a change in the way in which the TAC operates. If the request is
granted, SJG will not experience significant fluctuations in income
when temperatures are warmer or colder than normal.
On March 5, 1998, the BPU approved new rates related to
appliance service charges, including a profit margin. The new
rates are competitive with those of other service providers in
New Jersey and are designed to increase earnings and cash flows
to SJG over the current rates. The BPU also authorized SJG to
institute new appliance service contract plans effective April
1, 1998, including electric air conditioning repairs within its
service territory.
On July 31, 1998, SJG filed a motion to establish a
procedure to further unbundle natural gas service. The BPU's
Order of June 26, 1998, which expanded the current residential
transportation pilot program, directed SJG to file a proposal in
which full residential unbundling would take place on or before
January 1, 1999. Many of the issues related to residential
SJG-21
unbundling also relate to the commercial and industrial
transportation program. Therefore, the motion encompasses all
issues surrounding both programs.
Environmental Remediation
The company incurred and recorded certain costs for
environmental remediation of sites where SJG or predecessor
companies operated gas manufacturing plants. SJG terminated
manufactured gas operations at all sites more than 35 years ago.
Since the early 1980s, SJG has recorded environmental cleanup
costs of $90.8 million. The company has spent $40.1 million as
of June 30, 1998. SJG, with the assistance of an outside
consulting firm, estimates that future costs to clean up the
sites will range from $50.7 million to $150.6 million. The
company recorded the lower end of this range as a liability.
It is reflected on the Condensed Consolidated Balance Sheet
under the captions "Current Liabilities" and "Deferred Credits
and Other Non-Current Liabilities." SJG's recorded
environmental cleanup costs do not directly affect earnings
because the company defers and recovers them through rates over
7-year amortization periods as allowed by the BPU. SJG did not
adjust the accrued liability for future insurance recoveries,
which the company is pursuing. SJG received $4.2 million of
insurance recoveries as of June 30, 1998. The company used
these proceeds to offset related legal fees and to reduce the
balance of deferred environmental remediation costs. Recorded
amounts include estimated costs based on projected investigation
and remediation work plans using existing technologies. Actual
costs could differ from the estimates due to the long-term
nature of the projects, changing technology, government
regulations and site specific requirements.
As a result of the 7-year recovery mechanism, SJG does not
expense environmental remediation costs when incurred and defers
costs to be recovered. SJG has two regulatory assets associated
with environmental cost. The first regulatory asset is titled
"Environmental Remediation Cost: Expended - Net." These
expenditures represent actual costs incurred to remediate former
gas manufacturing plant sites net of rate and insurance
recoveries. These costs meet the requirements of FASB No. 71,
"Accounting for the Effects of Certain Types of Regulation."
The BPU allowed recovery of these expenditures through July 1995
and petitions to recover these costs through July 1998 are
pending.
The other regulatory asset titled "Environmental Remediation
Cost: Liability for Future Expenditures" relates to estimated
future expenditures determined under the guidance of FASB No. 5,
"Accounting for Contingencies." This amount, which relates to
former manufactured gas plant sites, was recorded as a deferred
debit with the corresponding amount reflected in Current
Liabilities and Deferred Credits and Other Non-Current
Liabilities, as appropriate. The deferred debit is a regulatory
asset under FASB No. 71, because the BPU's intent, as evidenced
by its current practice, is to provide recovery sufficient to
recover the deferred costs after they are expended.
SJG files with the BPU to recover expended remediation costs
through its RAC. The BPU has consistently allowed the full
recovery over 7-year periods, and SJG believes this will
SJG-22
continue. As of June 30, 1998 , SJG's unamortized clean-up
costs of $21.3 million are reflected on the balance sheet under
the caption "Regulatory and Other Non-Current Assets." Since
BPU approval of the RAC mechanism in August 1992, SJG recovered
$14.6 million as of June 30, 1998.
On July 31, 1996, 1997 and 1998, SJG made its annual filings
with the BPU to recover remediation costs expended during the
period of August 1995 through July 1998. In 1998, the company
requested an increase in the level of its annual recoveries of
$4.5 million. This increase represents combined changes for
three years since SJG's last two proceedings remain unresolved.
Other Regulatory Asset Recovery
The adoption of FASB No. 109, "Accounting for Income Taxes," in
1993 primarily resulted in creating a regulatory asset and a
deferred income tax liability. As a result of positions taken
in the 1994 rate case, the amortization of the asset is being
recovered through rates over an 18-year period which began in
December 1994. Also, FASB No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," adopted by the
company in 1993, requires an accrual basis of accounting for
retiree benefit payments during the years of employment. The
company elected to recognize the unfunded transition obligation
over a 20-year period beginning in 1993. The majority of the
postretirement benefit costs were previously recoverable by SJG
through rates on a pay-as-you-go basis. A December 1994 BPU
order provided for partial recovery of costs associated with
FASB No. 106 and prescribed continued deferral of unrecovered
costs. Beginning January 1, 1998, the BPU approved full
recovery of the net periodic benefit cost as well as recovery of
the regulatory asset over a 15-year period. In 1995, an
external trust was established towards funding postretirement
benefit costs. Rate recovery in excess of SJG's pay-as-you-go
requirement is contributed to the trust and provides no
operating benefit to SJG except to the extent that trust income
reduces future net periodic cost. Gross contributions to the
trust amounted to $8.2 million and the balance of the regulatory
asset amounted to $5.8 million at June 30, 1998.
Other
The company is subject to claims which arise in the ordinary
course of its business and other legal proceedings. As such,
reserves are set up when these claims become apparent. The
company also maintains insurance and records probable insurance
recoveries relating to outstanding claims.
A group of Atlantic City casinos filed a petition with the BPU
on January 16, 1996 alleging overcharges of over $10.0 million,
including interest. Management believes that charges to the
casinos were based on applicable SJG tariffs and that the
casinos were not qualified under less expensive rate schedules,
as claimed. Management believes that the ultimate impact of
these actions will not materially affect the company's financial
position, results of operations or liquidity.
SJG-23
Capital Resources
The company has a continuing need for cash resources and
capital, primarily to invest in new and replacement facilities,
equipment and for environmental cleanup costs. Net construction
and remediation expenditures for the first six months of 1998
amounted to $25.9 million. The annual costs for 1998, 1999 and
2000 are estimated at approximately $72.0 million, $56.3 million
and $49.4 million, respectively. These investments are expected
to be funded from several sources, which may include cash
generated by operations, temporary use of short-term debt, sale
of first mortgage bonds, capital leases and RAC recoveries.
On March 21, 1997, SJG sold $35.0 million of its First Mortgage
Bonds, 7.7% Series due 2027.
On May 2, 1997, SJG's Delaware statutory trust subsidiary, SJG
Capital Trust, sold $35.0 million of 8.35% SJG-guaranteed
Mandatorily Redeemable Preferred Securities. The Trust holds as
its sole asset the 8.35% Deferrable Interest Subordinated
Debentures issued by SJG maturing April 30, 2037. The
Debentures and Preferred Securities are redeemable at the option
of SJG at a redemption price equal to 100% of the principal
amount at any time on or after April 30, 2002.
On July 10, 1998, SJG filed a petition with the BPU requesting
authority to establish a Medium Term Note (MTN) program. The
petition requests authority to issue $100 million of MTN's
through December 2001. The net proceeds of this MTN program
will be used to retire short-term debt and to fund capital
expenditures.
Inflation
The ratemaking process provides that only the original cost of
utility plant is recoverable in revenues as depreciation.
Therefore, the excess cost of utility plant, stated in terms of
current cost over the original cost of utility plant, is not
presently recoverable. While the ratemaking process gives no
recognition to the current cost of replacing utility plant,
based on past practices, SJG believes it will be allowed to earn
on the increased cost of its net investment as replacement of
facilities actually occurs.
Summary
The company is confident it will have sufficient cash flow to
meet its operating, capital and dividend needs and is taking and
will take such actions necessary to employ its resources
effectively.
SJG-24
PART II OTHER INFORMATION
Item l. Legal Proceedings
Information required by this Item is incorporated by reference
to Part I, Item 1, Note 6, on pages 11, 12 and 13 excluding the
first two paragraphs of the Note, regarding contingencies,
including pending litigation and the remediation and clean-up of
certain sites which included manufactured gas operations.
Item 6. Exhibits and Reports on Form 8-K
b. No reports on Form 8-K were filed during the quarter
for which this report is filed.
SJG-25
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 GAS COMPANY
(Registrant)
Dated: August 12, 1998 By: /s/ David A. Kindlick
David A. Kindlick
Senior Vice President,
Finance & Rates
Dated: August 12, 1998 By: /s/ William J. Smethurst, Jr.
William J. Smethurst, Jr.
Vice President and Treasurer
SJG-26
SOUTH JERSEY GAS COMPANY
Index to Exhibits
Exhibit Number Description
27 Financial Data Schedule
(Submitted only in electronic format to
the Securities and Exchange Commission).
SJG-27