SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number 000-22211
SOUTH JERSEY GAS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 21-0398330
(State of incorporation) (IRS employer identification no.)
1 South Jersey Plaza, Folsom, New Jersey 08037
(Address of principal executive offices, including zip code)
(609) 561-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Company Guaranteed Mandatorily Redeemable
Preferred Securities of Subsidiary Trust,
$25 Value per Preferred Security New York Stock Exchange
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
All of the equity securities of the registrant are owned by South Jersey
Industries, Inc., its parent company, a 1934 Act reporting company named in the
registrants description of its business, which has itself fulfilled its 1934
Act filing requireme nts.
During the preceding 36 months (and any subsequent period of days) there has
not been any default in (1) any of the indebtedness of the registrant or its
subsidiaries, and (2) the payment of rentals under material long-term leases
(of which there are none).
The registrant meets all of the conditions set forth in General Instruction I
1(a) and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.
Documents Incorporated by Reference: None
SJG-1
PART I
Item 1. Business
General
The registrant, South Jersey Gas Company (SJG), a New Jersey corporation,
is an operating public utility. SJG owns all of the common stock of SJG
Capital Trust, a statutory trust organized in the state of Delaware. All of
the equity securities of SJG are owned by South Jersey Industries, Inc. (SJI),
its parent company, which is itself a 1934 Act reporting company.
Financial Information About Industry Segments
Not applicable.
Description of Business
SJG is an operating public utility company engaged in the purchase,
transmission and sale of natural gas for residential, commercial and industrial
use in an area of approximately 2,500 square miles in the southern part of New
Jersey. 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 by some of its customers.
SJG's service territory includes 112 municipalities throughout Atlantic,
Cape May, Cumberland and Salem Counties and portions of Burlington, Camden and
Gloucester Counties, with an estimated permanent population of 1.2 million.
SJG serves 273,899 residential, commercial and industrial customers (at
December 31, 1999) in southern New Jersey. Gas sales and transportation for
1999 amounted to approximately 96,571 MMcf (million cubic feet), of which
approximately 50,080 MMcf was firm sales and transportation, 4,011 MMcf was
interruptible sales and transportation and 42,480 MMcf was off-system sales.
The breakdown of firm sales includes 35.4% residential, 9.3% commercial, 4.6%
cogeneration and electric generation, .5% industrial and 50.2% transportation.
At year-end 1999, SJG served 254,601 residential customers, 18,894 commercial
customers and 404 industrial customers. This includes 1999 net additions of
6,391 residential customers, 437 commercial customers and 6 industrial
customers.
Under an agreement with Conectiv, Inc., an electric utility serving
southern New Jersey, SJG supplies natural gas to several electric generation
facilities. This gas service is provided under the terms of a firm electric
service tariff approved by the New Jersey Board of Public Utilities (BPU) on a
demand/commodity basis. In 1999, 2.3 Bcf (billion cubic feet) was delivered
under this agreement.
SJG serviced 6 cogeneration facilities in 1999. Combined sales and
transportation of natural gas to such customers amounted to approximately
5.0 Bcf in 1999.
SJG makes wholesale gas sales for resale to gas marketers for ultimate
delivery to end users. These "off-system" sales are made possible through the
issuance of Federal Energy Regulatory Commission (FERC) Orders No. 547 and 636.
Order No. 547 issued a blanket certificate of public convenience and necessity
authorizing all parties, which are not interstate pipelines, to make FERC
jurisdictional gas sales for resale at negotiated rates, while Order No. 636
allowed SJG to deliver gas at delivery points on the interstate pipeline system
other than its own city gate stations and release excess pipeline capacity to
third parties. During 1999, off-system sales amounted to 42.5 Bcf. Also in
1999, capacity release and storage throughput amounted to 29.2 Bcf.
SJG-2
Supplies of natural gas available to SJG that are in excess of the
quantity required by those customers who use gas as their sole source of fuel
(firm customers) make possible the sale and transportation of gas on an
interruptible basis to commercial and industrial customers whose equipment is
capable of using natural gas or other fuels, such as fuel oil and propane. The
term "interruptible" is used in the sense that deliveries of natural gas may be
terminated by SJG at any time if this action is necessary to meet the needs of
higher priority customers as described in SJG's tariffs. Usage by
interruptible customers, excluding off-system customers, in 1999 amounted to
approximately 4.0 Bcf, approximately 3.2 percent of the total throughput.
No material part of SJG's business is dependent upon a single customer or
a few customers.
Service Territory
The majority of SJG's residential customers reside in the northern and
western portions of its service territory in Burlington, Camden, Salem and
Gloucester counties. A majority of new customers reside in this section of the
service territory, which includes the residential suburbs of Wilmington and
Philadelphia. The franchise area to the east is centered on Atlantic City and
the neighboring resort communities in Atlantic and Cape May counties, which
experience large population increases in the summer months. The impact of the
casino gaming industry on the Atlantic City area has resulted in the creation
of new jobs and the expansion of the residential and commercial infrastructure
necessary to support a developing year-round economy. Atlantic City is
experiencing a second wave of development as a result of casino gaming. With
the completion of a multipurpose convention center, accompanied by additional
casino, hotel and entertainment development, Atlantic City is enhancing its
status as a year-round destination resort.
Manufacturers or processors of sand, glass, farm products, paints,
chemicals and petroleum products are located in the western and southern
sectors of the service territory. New commercial establishments and high
technology industrial parks and complexes are part of the economic growth of
this area. SJG's service area includes parts of the Pinelands region, a
largely undeveloped area in the heart of southern New Jersey. Future
construction in this area is expected to be limited by statute and by a master
plan adopted by the New Jersey Pinelands Commission; however, in terms of
potential growth, significant portions of SJG's service area are not affected
by these limitations.
Rates and Regulation
As a public utility, SJG is subject to regulation by the BPU.
Additionally, the Natural Gas Policy Act, which was enacted in November 1978,
contains provisions for Federal regulation of certain aspects of SJG's
business. SJG is affected by Federal regulation with respect to transportation
and pricing policies applicable to its pipeline capacity from Transcontinental
Gas Pipeline Corporation (Transco), SJG's major supplier, Columbia Gas
Transmission Corporation (Columbia), CNG Transmission Corporation (CNG) and
Equitrans, Inc. (Equitrans), since such services are provided under rates and
terms established under the jurisdiction of the FERC.
Retail sales by SJG are made under rate schedules within a tariff filed
with and subject to the jurisdiction of the BPU. These rate schedules provide
primarily for either block rates or demand/commodity rate structures. The
tariff contains provisions permitting SJG to pass on to customers increases and
decreases in the cost of purchased gas supplies. The tariff also contains
provisions permitting the recovery of environmental remediation costs
associated with former manufactured gas plant sites and for the adjustment of
revenues due to the impact of "temperature" fluctuations as prescribed in SJG's
tariff.
In February, 1999, the Electric Discount and Energy Competition Act (the
Act) was signed into law in New Jersey. This bill created the framework and
necessary time schedules for the restructuring of the state's electric and
natural gas utilities. The Act established "unbundling", where redesigned
utility rate structures allow natural gas and electric consumers to choose
their energy supplier. It also established time frames for instituting
competitive services for customer account functions and to determine whether
basic gas supply service should become competitive.
SJG-3
SJG received BPU approval of its unbundling proposal in January 2000. In
addition to allowing all customers to select their own gas supplier, the
approval incented customers to choose a supplier other than SJG with a Market
Development Credit (MDC). This credit is available to customers through
December 2001. The credit, approximately $2.5 million plus carrying costs,
appears on SJG's books as a Deferred Credit. Therefore, the MDC should not
materially impact future periods.
The unbundling proposal also provided SJG with the ability to recover
carrying costs on unrecovered remediation costs under the Remediation
Adjustment Clause (RAC), while holding the current RAC rate in effect through
October 2002. Our RAC rate last changed in September 1999. SJG's Levelized
Gas Adjustment Clause (LGAC) was also modified by the unbundling process.
Under-recovered gas costs of $11.9 million as of October 31, 1999, and related
carrying costs, will be recovered over 3 years. The LGAC for the period
starting November 1999, continues to operate as it has in the past.
The Act also contains numerous provisions requiring the BPU to promulgate
and adopt a variety of standards related to implementing the Act. These
required standards address fair competition, affiliate relations, accounting,
competitive services, supplier licensing, consumer protection and aggregation.
In March 2000, the BPU issued Interim Standards in response to the Act. We
believe the final standards will not have a material adverse affect on the
company.
Revenue requirements for ratemaking purposes are established on the basis
of firm and interruptible sales projections. In January 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 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 (Sharing
Formula) increased from $4.0 million to $5.0 million. Later in 1997, the $5.0
million threshold increased by $500,000 -- the annual revenue requirement
associated with completing a specific pipeline interconnection. At the end of
1998, the threshold increased by another $2.0 million, with the completion of
major construction projects. SJG keeps 100% of pre-tax margins up to the
threshold level and 20% of such margins above that level. In October 1998, the
BPU approved a revision to the Sharing Formula as part of an agreement to
modify SJG's Temperature Adjustment Clause (TAC). The revision credits the
first $750,000 above the current threshold level to the LGAC customers.
Thereafter, SJG keeps 20% of the pre-tax margins as it has historically.
Additional information on regulatory affairs is incorporated by reference to
Notes 1, 2, 6, and 12 to SJG's consolidated financial statements for the year
ended December 31, 1999. See Item 8.
SJG Capital Trust, a Delaware statutory trust, is a wholly owned
subsidiary of SJG, which had the sole purpose of issuing beneficial interests
in its assets (Preferred Securities). The proceeds of selling such Preferred
Securities were invested in Deferrable Interest Subordinated Debentures issued
by SJG. SJG is the guarantor of such Preferred Securities.
In 1999, SJG made no public announcement of, or otherwise made public
information about, a new product or industry segment that would require the
investment of a material amount of the assets of SJG or which otherwise was
material.
SJG-4
Raw Materials
Transportation Contracts and Storage
SJG has direct connections to two interstate pipeline companies, Transco
and Columbia. During 1999, SJG purchased and had delivered approximately
68.2 Bcf of natural gas for distribution to both on-system and off-system
customers. Of this total, 52.4 Bcf was transported on the Transco pipeline
system and 15.8 Bcf was transported on the Columbia pipeline system. SJG also
secures firm transportation and other long term services from four additional
pipelines upstream of the Transco and Columbia systems. They include: Columbia
Gulf Transmission Company (Columbia Gulf), Sempra Energy Trading Corp.
(Sempra), Texas Gas Transmission Corporation (Texas Gas) and Equitrans.
Services provided by these upstream pipelines are utilized to deliver gas into
either the Transco or Columbia systems for ultimate delivery to SJG. Services
provided by all of the above mentioned pipelines are subject to changes as
directed by FERC Order No. 636.
Transco:
Transco is SJG's largest supplier of long-term gas transmission services.
These services include four year-round and one seasonal firm transportation
(FT) service arrangements. When combined, these services enable SJG to
purchase from third parties and have delivered to its city gate stations by
Transco a total of 159,589 Thousand Cubic Feet of gas per day ("Mcf/d"). The
terms of the year-round agreements extend for various periods from 2002 to 2010
while the term of the seasonal agreement extends to 2011.
SJG also has seven long-term gas storage service agreements with Transco
that, when combined, are capable of storing approximately 10.1 Bcf. Through
these services, SJG can inject gas into storage during periods of low demand
and withdraw gas at a rate of up to 86,999 Mcf/d during periods of high demand.
The terms of the storage service agreements extend for various periods from
2001 to 2008.
Sempra:
SJG has separate gas sales and capacity management agreements with Sempra,
which were formerly with CNG Energy Service Corp., which provide SJG with up to
9,662 Mcf/d of gas during the period November 16 through March 31 of each year.
Columbia:
SJG has three firm transportation agreements with Columbia which, when
combined, provide for 43,500 Mcf/d of firm deliverability.
SJG also subscribes to a firm storage service from Columbia, to
March 31, 2009, which provides a maximum withdrawal quantity of 51,102 Mcf/d
during the winter season with an associated 3,355,557 Mcf of storage capacity.
Equitrans:
SJG has a long-term storage service provided by Equitrans, to
April 1, 2002, under which up to 500,000 Mcf of gas may be stored during the
summer season and up to 4,829 Mcf/d may be withdrawn during the winter season.
The gas is delivered to SJG under firm transportation agreements with
Equitrans, CNG and Transco.
Gas Supplies
SJG has several long-term gas supply agreements with various producers and
marketers that expire between 2000 and 2007. Under these agreements, SJG can
purchase up to 66,427,914 Mcf of natural gas per year. When advantageous, SJG
SJG-5
can purchase spot supplies of natural gas in place of or in addition to those
volumes reserved under long term agreements.
The following chart shows by percentage the actual sources of purchased
gas supply for each of the last three years:
1999 1998 1997
------ ------ ------
Long-Term Contract 76.8% 61.8% 73.2%
Spot 23.2% 38.2% 26.8%
------ ------ ------
Total 100.0% 100.0% 100.0%
Supplemental Gas Supplies
SJG has a long term Liquified Natural Gas (LNG) purchase agreement with a
third party provider which extends through October 31, 2000. For the 1999-2000
contract year, SJG's annual contract quantity under the agreement is
186,047 Mcf. LNG purchases under this agreement are transported to SJG's LNG
storage facility in McKee City, New Jersey via over-the-road trucks. SJG is
currently in the process of securing a new LNG contract to replace the existing
deal.
SJG operates peaking facilities which can store and vaporize LNG for
injection into its distribution system. SJG's LNG facility has a storage
capacity equivalent to 404,000 Mcf of natural gas and has an installed capacity
to vaporize up to 90,000 Mcf of LNG per day for injection into its distribution
system.
SJG also operates a high pressure pipe storage field at its McKee City
facility which is capable of storing 12,000 Mcf of gas and injecting up to
10,000 Mcf/d of gas into SJG's distribution system.
Peak-Day Supply
SJG plans for a winter season peak-day demand on the basis of an average
daily temperature of 2 degrees F. Gas demand on such a design day was
estimated for the 1999-2000 winter season to be 443,198 Mcf versus a design day
supply of 460,565 Mcf. On January 17, 2000, SJG experienced its highest
peak-day demand of 371,612 Mcf with an average temperature of 12.95 degrees F.
In 1999, SJG experienced a peak-day demand of 323,750 Mcf with an average
temperature of 22.58 degrees F.
Gas Prices
SJG's average commodity cost of gas purchased in 1999 was $2.30 per Mcf.
Patents and Franchises
SJG holds nonexclusive franchises granted by municipalities in the seven
county area of southern New Jersey that it serves. No other natural gas public
utility presently serves the territory covered by SJG's franchises. Otherwise,
patents, trademarks, licenses, franchises and concessions are not material to
the business of SJG or its subsidiary.
Seasonal Aspects
SJG experiences seasonal fluctuations in sales when selling natural gas
for heating purposes. SJG meets this seasonal fluctuation in demand from its
firm customers by buying and storing gas during the summer months, and by
SJG-6
drawing from storage and purchasing supplemental supplies during the heating
season. As a result of this seasonality, SJG's revenues and net income are
significantly higher during the first and fourth quarters than during the
second and third quarters of the year.
Working Capital Practices
As stated under Seasonal Aspects, SJG buys and stores natural gas during
the summer and fall months. These purchases are financed by short-term loans
which are significantly reduced during the winter months when gas revenues are
higher. Reference is also made to "Liquidity" included in Item 7, Management's
Discussion and Analysis of Results of Operations and Financial Condition.
Customers
No material part of SJG's business is dependent upon a single customer or
a few customers, the loss of which would have a material adverse effect on any
such business. See Item 1, "Service Territory."
Backlog
Backlog is not material to an understanding of SJG's business.
Government Contracts
No material portion of SJG's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of any
government.
Competition
SJG's franchises are non-exclusive, however, currently no other utility is
providing service within its territory. SJG competes with oil, propane and
electricity suppliers for residential, commercial and industrial users. The
market for natural gas commodity sales is subject to competition as a result of
deregulation. Through its tariff, SJG has promoted competition while
maintaining its margins. Substantially all of SJG's profits are from the
transportation rather than the sale of the commodity. SJG believes it has been
a leader in addressing the changing marketplace, while maintaining focus on
being a low-cost provider of natural gas and energy services. SJG also
competes with other marketers/brokers in the selling of wholesale natural gas
services.
Research
During the last three fiscal years, SJG did not engage in research
activities to any material extent.
Environmental Matters
Information on environmental matters is incorporated by reference to
Note 12 to SJG's consolidated financial statements for the year ended
December 31, 1999. See Item 8.
Employees
SJG had a total of 626 employees as of December 31, 1999.
Financial Information About Foreign and Domestic Operations and Export Sales
SJG has no foreign operations and export sales are not a part of its
business.
SJG-7
Item 2. Properties
The principal property of SJG consists of its gas transmission and
distribution systems that include mains, service connections and meters. The
transmission facilities carry the gas from the connections with Transco and
Columbia to SJG's distribution systems for delivery to customers. As of
December 31, 1999, there were approximately 92 miles of mains in the
transmission systems and 5,132 miles of mains in the distribution systems.
SJG owns office and service buildings, including its corporate
headquarters, at seven locations in the territory and a liquefied natural gas
storage and vaporization facility.
As of December 31, 1999, the SJG utility plant had a gross book value of
$721.3 million and a net book value, after accumulated depreciation, of
$529.1 million. In 1999, $47.4 million was spent on additions to utility plant
and there were retirements of property having an aggregate gross book cost of
$6.0 million. Construction and remediation expenditures for 2000 are currently
expected to approximate $49.8 million.
Virtually all of SJG's transmission pipeline, distribution mains and
service connections are in streets or highways or on the property of others.
The transmission and distribution systems are maintained under franchises or
permits or rights-of-way, many of which are perpetual. SJG's properties (other
than property specifically excluded) are subject to a lien of mortgage under
which its first mortgage bonds are outstanding. We believe these properties
are well maintained and in good operating condition.
Item 3. Legal Proceedings
SJG is subject to claims which arise in the ordinary course of its
business and other legal proceedings. We set up reserves when claims become
apparent. We also maintain insurance and record probable insurance recoveries
relating to outstanding claims. Management of SJG believes that any pending or
potential legal proceedings will not materially affect its operations or
consolidated financial position.
Item 4. Submission Of Matters To A Vote of Security Holders
Not applicable.
SJG-8
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Common equity securities of SJG, owned by its parent company, South Jersey
Industries, Inc., are not traded on any stock exchange.
Cash dividends are usually declared on SJG's common stock on a quarterly
basis. SJG is restricted under its First Mortgage Indenture, as supplemented,
as to the amount of cash dividends or other distributions that may be paid on
its common stock. Retained earnings free of such restriction approximate
$56.6 million at December 31, 1999.
If preferred stock dividends are in arrears, no dividends may be declared
or paid, or other distribution made on the common stock of SJG. If four or
more quarterly dividends are in arrears, the Preferred Shareholders may elect a
majority of SJG's directors. See Note 4 of SJG's consolidated financial
statements for additional information on Capitalization. See Item 8.
SJG-9
Item 6. Selected Financial Data
The following financial data has been obtained from SJG's audited
financial statements:
<TABLE>
(In Thousands Except for Share Data)
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $350,921 $299,070 $327,548 $330,335 $282,719
=======================================================
Operating Income $44,025 $36,978 $39,996 $38,849 $35,438
=======================================================
Income before Preferred Securities
Dividend Requirement 23,466 17,910 22,000 19,389 15,991
Preferred Dividend Requirements:
Preferred Stock (162) (166) (170) (174) (178)
Preferred Securities (2,922) (2,922) (1,932) 0 0
-------------------------------------------------------
Net Income Applicable to Common Stock $20,382 $14,822 $19,898 $19,215 $15,813
=======================================================
Average Shares of Common Stock
Outstanding 2,339,139 2,339,139 2,339,139 2,339,139 2,339,139
Earnings per Common Share $8.71 $6.34 $8.51 $8.21 $6.76
Ratio of Earnings to Fixed Charges (1) 2.5x 2.2x 2.6x 2.5x 2.3x
<CAPTION>
As of December 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Property, Plant and Equipment, Net $530,874 $502,243 $454,239 $421,622 $396,770
=======================================================
Total Assets $750,239 $720,136 $649,113 $599,926 $549,950
=======================================================
Capitalization:
Common Equity (2) $182,122 $162,940 $164,785 $134,564 $130,406
Preferred Stock and Securities (3) 37,044 37,134 37,224 2,314 2,404
Long-Term Debt 183,561 194,710 175,860 149,736 156,784
-------------------------------------------------------
Total $402,727 $394,784 $377,869 $286,614 $289,594
=======================================================
<FN>
(1) The ratio of earnings to fixed charges represents, on a pre-tax basis, the number of times earnings cover
fixed charges. Earnings consist of net income, to which has been added fixed charges and taxes based on
income of the company, excluding the cumulative effect of an accounting change. Fixed charges consist of
interest charges and preferred securities dividend requirements and an interest factor in rentals.
(2) Included are cash contributions to capital as follows: 1999 - $15.0 million; 1997 - $25.6 million; 1995 - $6.0 million.
(3) Includes sale in 1997 of $35.0 million Company Guaranteed Mandatorily Redeemable Preferred Securities
of Subsidiary Trust.
</FN>
</TABLE>
SJG-10
Comparative statistical data related to revenues and gas throughput
is as follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues (Thousands):
Firm
Residential $152,946 $147,274 $176,717 $177,673 $151,720
Commercial 35,064 36,328 60,418 70,755 58,135
Industrial 4,879 4,175 5,535 7,540 6,014
Cogeneration & Electric Generation 8,496 8,119 5,249 16,173 15,725
Firm Transportation 33,125 24,893 15,966 10,473 13,930
--------- --------- --------- --------- ---------
Total Firm 234,510 220,789 263,885 282,614 245,524
Interruptible 1,645 2,506 6,085 7,256 6,786
Interruptible Transportation 1,724 2,598 3,507 2,630 2,778
Off-System 104,142 62,578 39,403 28,236 20,360
Capacity Release & Storage 4,193 6,031 8,533 4,349 3,374
Other 4,707 4,568 6,135 5,250 3,897
--------- --------- --------- --------- ---------
Total Operating Revenues $350,921 $299,070 $327,548 $330,335 $282,719
========= ========= ========= ========= =========
Throughput (MMcf):
Firm
Residential 17,741 16,979 19,955 21,699 19,573
Commercial 4,634 4,826 8,067 10,117 8,945
Industrial 246 348 733 1,238 1,016
Cogeneration & Electric Generation 2,316 2,373 1,230 5,180 4,860
Firm Transportation 25,143 22,336 20,196 12,969 14,417
--------- --------- --------- --------- ---------
Total Firm Throughput 50,080 46,862 50,181 51,203 48,811
--------- --------- --------- --------- ---------
Interruptible 383 694 1,345 1,618 1,843
Interruptible Transportation 3,628 6,049 7,586 5,422 5,888
Off-System 42,480 26,916 14,462 8,571 9,590
Capacity Release & Storage 29,247 27,319 36,382 25,460 25,915
--------- --------- --------- --------- ---------
Total Throughput 125,818 107,840 109,956 92,274 92,047
========= ========= ========= ========= =========
Number of Customers at Year End:
Residential 254,601 248,210 242,132 236,008 230,446
Commercial 18,894 18,457 18,037 17,469 17,179
Industrial 404 398 398 397 397
--------- --------- --------- --------- ---------
Total Customers 273,899 267,065 260,567 253,874 248,022
========= ========= ========= ========= =========
Maximum Daily Sendout (MMcf) 324 314 355 325 335
========= ========= ========= ========= =========
Annual Degree Days 4,468 4,110 4,829 5,175 4,865
========= ========= ========= ========= =========
Normal Degree Days * 4,664 4,708 4,728 4,689 4,709
========= ========= ========= ========= =========
<FN>
* Average degree days recorded in SJG service territory during 20-year period
ended June 30 of prior year.
</FN>
</TABLE>
SJG-11
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Overview
South Jersey Gas Company (SJG) is a wholly-owned subsidiary of South
Jersey Industries, Inc. (SJI). SJG is a regulated natural gas distribution
company serving 273,899 customers at December 31, 1999, compared with 267,065
customers at December 31, 1998. SJG also makes off-system sales of natural gas
on a wholesale basis to various customers on the interstate pipeline system.
In addition, SJG transports natural gas purchased directly from producers or
suppliers for our own sales and for some of our customers.
Forward-Looking Statements
This report contains certain forward-looking statements concerning
projected financial and operating performance, future plans and courses of
action and future economic conditions. All statements in this report other
than statements of historical fact are forward-looking statements. These
forward-looking statements are made based upon management's expectations and
beliefs concerning future events impacting SJG and involve a number of risks
and uncertainties. We caution that forward-looking statements are not
guarantees and actual results could differ materially from those expressed or
implied in the forward-looking statements. Also, in making forward-looking
statements, we assume no duty to update these statements should actual results
and events differ from current expectations.
A number of factors could cause our actual results to differ materially
from those anticipated, including, but not limited to the following: general
economic conditions on an international, federal, state and local level;
weather conditions in our marketing areas; regulatory and court decisions;
competition; the availability and cost of capital; our ability to maintain
existing and/or establish successful new alliances and joint ventures to take
advantage of marketing opportunities; costs and effects of unanticipated legal
proceedings, environmental liabilities and Year 2000-related costs or operating
problems; and changes in business strategies.
Competition
SJG's franchises are non-exclusive. Currently, no other utility provides
retail gas distribution services within our territory. We do not expect any
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. We enhanced SJG's competitive position while
maintaining margins by using an unbundled tariff. This tariff allows full cost
of service recovery, except for the variable cost of the gas commodity, when
transporting gas for our customers. Under this tariff, SJG profits from
transporting, rather than selling, the commodity. SJG's residential,
commercial and industrial customers can choose their supplier while we recover
the cost of service through transportation service (See Customer Choice
Legislation). We believe SJG is a leader in addressing the changing
marketplace, while focusing on being a low-cost provider of natural gas and
energy services.
Customer Choice Legislation
Effective January 1, 2000, all residential natural gas customers in New
Jersey are able to choose their gas supplier under the terms of the Electric
Discount and Energy Competition Act of February 1999. Commercial and
industrial customers have had the ability to choose gas suppliers since 1987.
SJG's residential customers have been able to choose a gas supplier since April
of 1997 under a pilot program. As of December 31, 1999, 35,683 SJG residential
customers participated in the program. Customers' bills are reduced for cost
of gas charges and applicable taxes. The resulting decrease in SJG's revenues
is offset by a corresponding decrease in gas costs and taxes under a
BPU-approved fuel clause. While customer choice can reduce utility revenues,
it does not negatively affect SJG's net income, financial condition or margins.
SJG-12
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 us to: adjust
customer bills for changes in gas supply costs; reduce the impact of
temperature fluctuations on SJG and its customers; recover remediation costs
for former gas manufacturing plants; and recover conservation plan costs. The
BPU-approved LGAC, RAC and DSMC adjustments match revenues with expenses. TAC
adjustments affect revenue, income and cash flows since colder-than-normal
weather can generate credits to customers, while warmer-than-normal weather can
result in additional billings to customers.
The BPU approved a revised TAC for SJG, effective October 1998. TAC
adjustments had the following impacts on 1999 and 1998 fourth quarter and
12-month net earnings:
1999 1998
------ ------
TAC Adjustment Increase to Net Income
($ in thousands)
Quarter Ended 12/31 $642 $361
12 Months Ended 12/31 $1,980 $607
While the revenue and income impacts of TAC adjustments are recorded as
incurred, cash inflows or outflows directly attributable to TAC adjustments do
not begin until the next TAC year. Each TAC year begins October 1.
Status of Year 2000 Impact
As of March 27, 2000, we were not aware of any material Y2K-related event
affecting either the operational or financial performance of SJG. We continue
to regularly monitor the output and performance of our information and
operating systems and our suppliers, but do not anticipate any material
residual Y2K problems. Total Y2K related costs were $0.53 million.
Results of Operations
Operating Revenues
Revenues increased $51.9 million in 1999 compared with 1998. The primary
reasons for the increase were higher off-system sales and 6,834 additional
customers. Results also benefited significantly from the revised TAC. These
factors more than offset revenue reductions due to the continued migration of
firm gas sales to firm transportation. Note, however, that SJG's tariffs are
structured so profits are derived from gas transportation, not commodity sales.
Consequently, the switch to firm transportation reduced revenues but did not
impact profitability. In 1998, revenues decreased $28.5 million primarily due
to weather that was 14.9% warmer than 1997. State tax reform and increased
firm transportation in lieu of firm gas sales also reduced revenues.
Weather in 1999 was 8.7% colder than in 1998, but was 4.2% warmer than the
20-year average. Previously, changes in temperatures were typically the single
most important factor in explaining revenue fluctuations for comparative
periods at SJG. Revisions to our TAC significantly reduced the weather-related
volatility in revenues. However, comparisons for the first two quarters of
1999 to the prior year's periods continued to show volatility as 1998 revenues
were heavily influenced by weather. Weather during the third quarter of the
year historically has minimal impact on SJG's earnings as heating requirements
are at their seasonal low point. The fourth quarter of 1999 and 1998 operated
under the same TAC. Revenues for 1999 were closely tied to 20-year normal
temperatures and not actual weather conditions.
SJG-13
Total gas throughput increased 16.6% to 125,818 MMcf in 1999. Throughput
in 1998 declined 1.9% to 107,840 MMcf compared to 1997. The majority of the
1999 increase was due to increased off-system sales. The 1998 decline was due
to weather-related reductions in residential and commercial usage.
Gas Purchased for Resale
Gas purchased for resale increased $37.6 million in 1999 compared with
1998 due mostly to increased sales volumes, particularly to off-system
customers. SJG's gas costs also accounted for a portion of the increase,
averaging $2.38/dt in 1999 compared with $2.35/dt in 1998. A $6.3 million
decline in 1998 compared with 1997 was due principally to warmer weather and
customers switching from gas sales to firm transportation. Gas supply sources
include contract and open-market purchases. SJG secures and maintains its own
gas supplies to serve its customers. The next contract expiration is in
October 2000. We do not anticipate any difficulty renewing or replacing
expiring contracts under substantially similar terms and conditions. SJG's
cumulative obligation for demand charges and reservation fees paid to suppliers
for these services is approximately $4.8 million per month, recovered on a
current basis through the LGAC.
Utility Operations
Summary of net changes in Utility Operations (in thousands):
1999 vs. 1998 1998 vs. 1997
------------- -------------
Production $9 $12
Transmission (47) 110
Distribution (238) 66
Customer Accounts and Services (343) 438
Sales (72) (147)
Administration and General 1,438 (1,256)
Other 23 (13)
------ ------
Total Net Change $(770) $(790)
====== ======
Distribution expenses declined due to improvements in operating practices.
These improvements included the implementation of an automated dispatch system
and home-based reporting of service personnel. Customer Accounts and Services
costs decreased in 1999 principally due to lower bad debt expenses and a
corresponding downward adjustment in reserves for uncollectible accounts. The
1998 increase was due principally to an increase in payroll expense.
Administrative and General costs increased in 1999 principally due to a change
in the way costs are allocated to subsidiaries at the SJI level. The decline
in 1998 was primarily due to a $1.5 million death benefit liability recorded in
1997.
Other Operating Expenses
Summary of principal changes in other consolidated operating expenses (in
thousands):
1999 vs. 1998 1998 vs. 1997
------------- -------------
Maintenance $775 $(200)
Depreciation 1,774 1,158
Income Taxes 3,199 697
Other Taxes 648 (19,981)
SJG-14
Higher Maintenance costs in 1999 were due primarily to higher levels of
amortization of previously deferred environmental remediation expenses. These
expenses did not negatively impact net income as they were offset by higher
revenue recovery through the RAC (See Notes 2 and 12). Depreciation is higher
due to increased investment in property, plant and equipment. Income Tax
changes reflect the impact of changes in pre-tax income. Other Taxes decreased
in 1998 due to the Energy Tax Reform Act implemented January 1998 (See
Note 5).
Interest Charges
Interest charges increased in 1999 due to higher average levels of
short-and long-term debt outstanding, partially offset by lower average
interest rates on debt outstanding during the year. The debt was incurred
primarily to support working capital needs and improvements to our gas
transmission and distribution system.
Net Income Applicable to Common Stock
The details affecting the changes in net income and earnings per 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 create large, short-term cash requirements.
These requirements are generally met by cash from operations and short-term
lines of credit. We maintain short-term lines of credit with a number of
banks, totaling $129 million, of which $10.1 million was available at
December 31, 1999. The credit lines are uncommitted and unsecured with
interest rates typically available based upon the Federal Funds Rate or London
Interbank Offered Rates (LIBOR).
The changes in cash flows from operating activities (in thousands):
1999 vs. 1998 1998 vs. 1997
------------- -------------
Increases/(Decreases):
Net Income Applicable to Common Stock $5,560 $(5,076)
Depreciation and Amortization 2,662 1,147
Provision for Losses on Accounts
Receivable (413) 14
Revenues and Fuel Costs Deferred - Net (5,163) 101
Deferred and Non-Current Income Taxes
and Credits - Net 357 318
Environmental Remediation Costs - Net 7,590 350
Accounts Receivable (9,890) (2,380)
Inventories 4,029 (1,591)
Prepayments and Other Current Assets (217) 751
Prepaid and Accrued Taxes - Net 19,397 (13,551)
Accounts Payable and Other Accrued
Liabilities 1,516 (6,278)
Other - Net 3,318 (1,106)
-------- --------
Net Cash Provided by Operating
Activities $28,746 $(27,301)
======== ========
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.
SJG-15
Decreases in Revenues and Fuel Costs Deferred - Net reflect
undercollection of fuel costs resulting from increases in natural gas costs and
payments or credits to customers for amounts previously overcollected.
Increases reflect overcollection of fuel costs or the recovery of previously
deferred fuel costs.
Changes in Deferred and Non-Current Income Taxes and Credits - Net
represent the differences between taxes accrued and amounts paid. Generally,
deferred income taxes related to deferred fuel costs will be paid in the next
year.
Changes in Environmental Remediation Costs - Net represent the differences
between amounts expended for environmental remediation compared with amounts
collected under the RAC and insurance recoveries.
Changes in Accounts Receivable are primarily due to higher receivable
balances due to off-system sales and the impact of colder weather on SJG's
sales volumes. Commodity prices also impact this line item. Changes impact
cash flows when receivables are collected in subsequent periods.
Changes in Inventories reflect the impact of seasonal requirements,
temperatures and commodity price changes.
Changes in Prepaid and Accrued Taxes - Net reflect the impact of
differences between taxes paid and accrued. Significant timing differences
exist in cash flows during the year. Approximately 50% of SJG's taxes are paid
in installments during the first half of the year and the remaining 50% are
paid May 15 of each year. SJG uses short-term borrowings to pay taxes,
resulting in a temporary increase in short-term debt levels. The carrying
costs of timing differences are recognized in base utility rates.
Changes in Accounts Payable and Other Current Liabilities reflect the
impact of timing differences between the accrual and payment of costs.
Changes in Other - Net reflect numerous changes in non-current assets and
liabilities, including accrued deferred income taxes. The majority of the
change in 1999 relates to the reclassification of previously deferred costs to
Utility Plant.
Regulatory Matters
Rate Actions
In February, 1999, the Electric Discount and Energy Competition Act (the
Act) was signed into law in New Jersey. This bill created the framework and
necessary time schedules for the restructuring of the state's electric and
natural gas utilities. The Act established "unbundling", where redesigned
utility rate structures allow natural gas and electric consumers to choose
their energy supplier. It also established time frames for instituting
competitive services for customer accounting functions and to determine whether
basic gas supply services should become competitive.
SJG received BPU approval of its unbundling proposal in January 2000. In
addition to allowing all customers to select their own gas supplier, the
approval incented customers to choose a supplier other than SJG with a Market
Development Credit (MDC). This credit is available to customers through
December 2001. The credit, approximately $2.5 million plus carrying costs,
appears on our books as a Deferred Credit. Therefore, the MDC will not
materially impact future periods.
The unbundling proposal also provided SJG with the ability to recover
carrying costs on unrecovered remediation costs under the RAC, while holding
the current RAC rate in effect through October 2002. Our RAC rate last changed
in September 1999. SJG's LGAC was also modified by the unbundling process.
Under-recovered gas costs of $11.9 million as of October 31, 1999, and related
carrying costs, will be recovered over 3 years. The LGAC for the period
starting November 1999, continues to operate as it has in the past.
SJG-16
The Act also contains numerous provisions requiring the BPU to promulgate
and adopt a variety of standards related to implementing the Act. These
required standards address fair competition, affiliate relations, accounting,
competitive services, supplier licensing, consumer protection and aggregation.
In March 2000, the BPU issued Interim Standards in response to the Act. We
believe the final standards will not have a material adverse affect on the
company.
In January 1997, the BPU granted SJG a total rate increase of $10.3
million. The $6 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. We recover the increase from new miscellaneous service fees that
charge specific customers for costs they cause us to incur. Additionally, our
starting point for sharing pre-tax margins generated by interruptible and
off-system sales and transportation (Sharing Formula) increased from $4 million
to $5 million. SJG was permitted to keep 100% of pre-tax margins up to the
threshold level and 20% of margins above that level. The $5 million threshold
increased by $500,000 later in 1997, and in December 1998, the threshold
increased an additional $2 million. The increases resulted from completion of
major construction projects. In October 1998, the BPU approved a revision to
the Sharing Formula as part of an agreement to modify SJG's TAC. The revision
credits the first $750,000 above the applicable threshold level to the LGAC
customers. Thereafter, SJG keeps 20% of the pre-tax margins as it has
historically.
SJG calculates rates of return by weighting individual capital cost rates
by the proportion of each prospective 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. In setting a rate of
return, the BPU must provide a utility and its investors with a return on
invested capital matching the risk so the utility can access capital required
to meet its public service responsibility.
In June 1998, we filed a petition with the BPU requesting a change to the
TAC. The request was granted in October 1998. As a result, SJG experiences
reduced fluctuations in income when weather is warmer or colder than normal.
In April 1999, the BPU approved an increase in our appliance service
rates, which SJG implemented that month. In June 1999, the BPU authorized SJG
to offer additional appliance service contract plans. The new rates and plans
are competitive with those of other service providers in New Jersey and are
designed to increase earnings and cash flows.
Environmental Remediation
SJG has incurred and recorded costs for environmental cleanup of sites
where SJG or its predecessors operated gas manufacturing plants. SJG stopped
manufacturing gas in the 1950s. Since the early 1980s, SJG recorded
environmental remediation costs of $109.6 million. We spent $58.5 million as
of December 31, 1999. With the assistance of an outside consulting firm, we
estimate that future costs to clean up the sites will range from $51 million to
$161.3 million. We recorded the lower end of this range as a liability. It is
reflected on the consolidated balance sheet under the captions, Current
Liabilities and Deferred Credits and Other Non-Current Liabilities. SJG did
not adjust the accrued liability for future insurance recoveries, which we have
been successful in pursuing. We 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.
SJG has two regulatory assets associated with environmental costs. The
first asset is titled Environmental Remediation Cost: Expended - Net. These
expenditures represent what was actually spent to clean up former gas
manufacturing plant sites. These costs meet the requirements of FASB No. 71,
"Accounting for the Effects of Certain Types of Regulation."
SJG-17
In September 1999, the BPU approved SJG's request to recover remediation
costs at former manufactured gas plant sites as permitted under the RAC. SJG's
RAC level increased from $0.0032 per therm to $0.0107 per therm to include all
RAC related expenditures made between 1993 and 1998. Consequently, we expect
to recover an additional $4.5 million per year for the next 7 years.
The other asset, titled Environmental Remediation Cost: Liability for
Future Expenditures, relates to estimated future expenditures determined under
FASB No. 5. This amount, which relates to former manufactured gas plant sites,
was recorded as a deferred debit with the corresponding amount reflected on the
consolidated balance sheet under the captions, Current Liabilities and Deferred
Credits and Other Non-Current Liabilities. The deferred debit is a regulatory
asset under FASB No. 71. The BPU's intent, evidenced by its current practice,
is to allow SJG to recover the deferred costs after they are spent.
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 December 31, 1999, SJG's unamortized
remediation costs of $25.7 million are reflected on the consolidated balance
sheet under the caption, Regulatory and Other Non-Current Assets. Since
implementing the RAC in 1992, SJG recovered $21.6 million through rates as of
December 31, 1999.
Other Regulatory Asset Recovery
Adopting FASB No. 109, "Accounting for Income Taxes," in 1993 primarily
resulted in creating a $17.6 million regulatory asset. SJG is recovering the
amortization of this asset through rates over 18 years which began in
December 1994. Also, SJG adopted FASB No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1993. The BPU provided for
partial recovery of costs associated with FASB No. 106 and prescribed continued
deferral of unrecovered costs until 1998. Beginning January 1998, the BPU
approved full recovery of the net periodic benefit cost as well as recovery of
the regulatory asset, amounting to $4.9 million at December 31, 1999, over 15
years.
Other
SJG is subject to claims arising in the ordinary course of business and
other legal proceedings. We set up reserves when these claims become apparent.
SJG also maintains insurance and records probable insurance recoveries relating
to outstanding claims.
Financial Risk Management
Our regulated natural gas business is subject to market risk due to
fluctuations in natural gas prices. To hedge against fluctuations, SJG has at
times entered into forward contracts. We recover gas costs through the LGAC,
and hedge against price fluctuations by using forward contracts.
To manage these transactions, we have a well-defined risk management
policy that includes volumetric and monetary limits. All derivative activities
described above are entered into for hedging, not trading, purposes.
Capital Resources
SJG has a continuing need for cash resources and capital, primarily to
invest in new and replacement facilities and equipment and for environmental
remediation costs. Net construction and remediation expenditures for 1999
amounted to $46.5 million. Net costs for 2000, 2001 and 2002 are estimated at
approximately $49.8 million, $45.5 million and $51.9 million, respectively. We
will fund these expenditures from several sources, which may include cash
generated by operations, temporary use of short-term debt, sale of medium-term
notes, capital leases and RAC recoveries and equity infusions from SJI.
SJG-18
SJI contributed $15.0 million of capital to SJG during 1999.
Contributions of capital are credited to Other Paid-In Capital and Premium on
Common Stock.
In March 1997, SJG sold $35 million of First Mortgage Bonds, 7.7% Series
due 2027.
In May 1997, SJG's Delaware statutory trust subsidiary, SJG Capital Trust
(Trust), sold $35 million of 8.35% SJG-Guaranteed Mandatorily Redeemable
Preferred Securities. The Trust's only assets are the 8.35% Deferrable
Interest Subordinated Debentures issued by SJG maturing April 2037. The
Debentures and Preferred Securities are redeemable at SJG's option at a price
equal to 100% of the principal amount at any time on or after April 30, 2002.
In October 1998, SJG issued $30 million of debt under a $100 million
Medium-Term Note Program. Notes totaling $10 million were issued at 6.12%,
maturing in 2010, and $20 million of notes were issued at 7.125%, maturing in
2018. The net proceeds of these note issuances were used to retire short-term
debt and to fund capital expenditures. The Medium-Term Note program had $70
million of availability remaining at December 31, 1999 and remains effective
through December 31, 2001.
Other Events
In August 1999, SJG completed the transition of all meter reading
activities to Millennium Account Services, LLP. Millennium began providing
meter reading services in southern New Jersey in January 1999. Customers
should benefit from reduced meter reading costs.
Inflation
In the ratemaking process, only the original cost of utility plant is
recoverable in revenues as depreciation. 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, SJG believes it will be allowed to
earn a return on the increased cost of its investment as facilities are
replaced.
Summary
We are confident SJG 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-19
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
SJG is exposed to interest rate risk and, to a much lesser degree,
commodity price risk. Outlined below is a description of these exposures and
an explanation as to how we manage these risks.
Interest Rate Risk - SJG is subject to the risk of fluctuating interest
rates in the normal course of business. We manage interest rates through the
use of fixed and, to a lesser extent, variable rate debt. For fiscal year
1999, a hypothetical 10% change in interest rates would have resulted in a
$0.48 million change in interest costs and earnings before taxes related to
variable rate debt.
Commodity Price Risk - SJG's natural gas businesses is subject to
market risk due to fluctuations in natural gas prices. To hedge against
fluctuations, SJG has at times entered into forward contracts. SJG recovers
gas costs through the LGAC, and hedges against price fluctuations by using
forward contracts.
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITOR'S REPORT
To the Shareholder and Board of Directors of
South Jersey Gas Company:
We have audited the consolidated balance sheets of South Jersey Gas Company and
subsidiary as of December 31, 1999 and 1998, and the related statements of
consolidated income and retained earnings and consolidated cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of South Jersey Gas Company and
subsidiary as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 16, 2000
SJG-20
<TABLE>
SOUTH JERSEY GAS COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
- ------
Property, Plant and Equipment: (Notes 1, 3 & 7)
Utility Plant, at original cost $721,338 $679,997
Accumulated Depreciation (192,240) (179,605)
Gas Plant Acquisition Adjustment - Net 1,776 1,851
---------- ----------
Property, Plant and Equipment - Net 530,874 502,243
---------- ----------
Available-for-Sale Securities 1,662 886
---------- ----------
Current Assets:
Cash and Cash Equivalents (Notes 1 & 9) 4,694 3,751
Accounts Receivable (Notes 2 & 3) 37,066 28,770
Unbilled Revenues (Note 1) 21,294 18,998
Provision for Uncollectibles (932) (1,032)
Natural Gas in Storage, average cost 26,840 27,619
Materials and Supplies, average cost 4,085 4,051
Prepaid Taxes (Note 1) 4,069 12,596
Prepayments and Other Current Assets 2,461 2,267
---------- ----------
Total Current Assets 99,577 97,020
---------- ----------
Accounts Receivable - Merchandise 684 990
---------- ----------
Regulatory and Other Non-Current Assets: (Note 1)
Environmental Remediation Costs: (Notes 2 & 12)
Expended - Net 25,702 27,500
Liability for Future Expenditures 51,029 52,939
Gross Receipts and Franchise Taxes (Note 6) 3,141 3,585
Income Taxes - Flowthrough Depreciation (Note 6) 11,531 13,021
Deferred Fuel Cost - Net (Notes 1 & 2) 13,174 5,509
Deferred Postretirement Benefit Costs (Note 11) 4,914 5,522
Other 7,951 10,921
---------- ----------
Total Regulatory and Other Non-Current Assets 117,442 118,997
---------- ----------
Total Assets $750,239 $720,136
========== ==========
<FN>
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
SJG-21
<TABLE>
SOUTH JERSEY GAS COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Capitalization and Liabilities
- ------------------------------
Common Equity: (Note 10)
Common Stock, Par Value $2.50 per share:
Authorized - 4,000,000 shares
Outstanding - 2,339,139 shares $5,848 $5,848
Other Paid-In Capital and Premium on Common Stock 117,817 102,817
Retained Earnings 58,457 54,275
---------- ----------
Total Common Equity 182,122 162,940
---------- ----------
Preferred Stock and Securities: (Note 4)
Redeemable Cumulative Preferred - Par Value $100 per share,
Authorized 45,504 and 46,404 shares, respectively
Outstanding:
Series A, 4.7% - 1,200 and 2,100 shares 120 210
Series B, 8% - 19,242 shares 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
---------- ----------
Total Preferred Stock and Securities 37,044 37,134
---------- ----------
Long-Term Debt (Notes 7 & 8) 183,561 194,710
---------- ----------
Total Capitalization 402,727 394,784
---------- ----------
Current Liabilities:
Notes Payable (Note 9) 118,900 97,000
Current Maturities of Long-Term Debt (Note 7) 8,876 8,876
Accounts Payable 34,822 40,823
Customer Deposits 5,386 5,576
Environmental Remediation Costs (Note 12) 12,534 8,752
Taxes Accrued (Note 2) 634 1,387
Interest Accrued and Other Current Liabilities 10,422 7,260
---------- ----------
Total Current Liabilities 191,574 169,674
---------- ----------
Deferred Credits and Other Non-Current Liabilities:
Deferred Income Taxes - Net (Note 5) 93,543 87,358
Environmental Remediation Costs (Note 12) 38,495 44,187
Pension and Other Postretirement Benefits (Note 11) 12,303 13,297
Investment Tax Credits (Note 6) 4,849 5,239
Other 6,748 5,597
---------- ----------
Total Deferred Credits and Other Non-Current Liabilities 155,938 155,678
---------- ----------
Commitments and Contingencies (Note 12)
Total Capitalization and Liabilities $750,239 $720,136
========== ==========
<FN>
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
SJG-22
<TABLE>
SOUTH JERSEY GAS COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS
(In Thousands Except for Per Share Data)
<CAPTION>
Year Ended December 31,
------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Operating Revenues:
Utility (Notes 1, 2 & 3) $347,941 $297,431 $324,766
Other 2,980 1,639 2,782
--------- --------- ---------
Total Operating Revenues 350,921 299,070 327,548
--------- --------- ---------
Operating Expenses:
Gas Purchased for Resale 212,460 174,822 181,166
Utility Operations 41,235 40,488 41,265
Other Operations 1,804 1,781 1,794
Maintenance 6,057 5,282 5,482
Depreciation (Note 1) 18,894 17,120 15,962
Income Taxes (Notes 1, 5 & 6) 15,455 12,256 11,559
Other Taxes (Notes 1 & 5) 10,991 10,343 30,324
--------- --------- ---------
Total Operating Expenses 306,896 262,092 287,552
--------- --------- ---------
Operating Income 44,025 36,978 39,996
Interest Charges
Long-Term Debt 15,721 15,218 15,165
Short-Term Debt and Other 4,838 3,850 2,831
--------- --------- ---------
Total Interest Charges 20,559 19,068 17,996
--------- --------- ---------
Income Before Preferred Dividend Requirements 23,466 17,910 22,000
Preferred Stock Dividend Requirements (Note 4) 162 166 170
Preferred Securities Dividend Requirements (Note 4) 2,922 2,922 1,932
--------- --------- ---------
Net Income Applicable to Common Stock 20,382 14,822 19,898
Retained Earnings at Beginning of Year 54,275 56,120 51,522
--------- --------- ---------
74,657 70,942 71,420
Dividends Declared - Common Stock 16,200 16,667 15,300
--------- --------- ---------
Retained Earnings at End of Year (Note 10) $58,457 $54,275 $56,120
========= ========= =========
Average Shares of Common Stock Outstanding 2,339 2,339 2,339
Earnings Per Common Share $8.71 $6.34 $8.51
========= ========= =========
Dividends Declared Per Common Share $6.93 $7.13 $6.54
========= ========= =========
<FN>
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
SJG-23
<TABLE>
SOUTH JERSEY GAS COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
<CAPTION>
Year Ended December 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Applicable to Common Stock $20,382 $14,822 $19,898
Adjustments to Reconcile Net Income to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization 21,676 19,014 17,867
Provision for Losses on Accounts Receivable 972 1,385 1,371
Revenues and Fuel Costs Deferred - Net (7,665) (2,502) (2,603)
Deferred and Non-Current Income Taxes and Credits - Net 6,773 6,416 6,098
Environmental Remediation Costs - Net 1,798 (5,792) (6,142)
Changes in:
Accounts Receivable (11,664) (1,774) 606
Inventories 745 (3,284) (1,693)
Prepayments and Other Current Assets (194) 23 (728)
Prepaid and Accrued Taxes - Net 7,774 (11,623) 1,928
Accounts Payable and Other Accrued Liabilities (3,029) (4,545) 1,733
Other - Net 3,036 (282) 824
--------- --------- ---------
Net Cash Provided by Operating Activities 40,604 11,858 39,159
--------- --------- ---------
Cash Flows from Investing Activities:
Purchase of Available-for-Sale Securities (776) (886) -
Capital Expenditures, Cost of Removal and Salvage (48,346) (65,824) (49,462)
--------- --------- ---------
Net Cash Used in Investing Activities (49,122) (66,710) (49,462)
--------- --------- ---------
Cash Flows from Financing Activities:
Net Borrowing from (Repayments of) Lines of Credit 21,900 51,100 (62,400)
Proceeds from Issuance of Long-Term Debt - 30,000 35,000
Principal Repayments of Long-Term Debt (11,149) (11,150) (6,603)
Dividends on Common Stock (16,200) (16,667) (15,300)
Proceeds from Issuance of Preferred Securities - - 35,000
Repurchase of Preferred Stock (90) (90) (90)
Payments for Issuance of Long-Term Debt and Preferred Securities - (557) (2,429)
Additional Investment by Shareholder 15,000 - 25,623
--------- --------- ---------
Net Cash Provided by Financing Activities 9,461 52,636 8,801
--------- --------- ---------
Net Increase(Decrease) in Cash and Cash Equivalents 943 (2,216) (1,502)
Cash and Cash Equivalents at Beginning of Year 3,751 5,967 7,469
--------- --------- ---------
Cash and Cash Equivalents at End of Year $4,694 $3,751 $5,967
========= ========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (Net of Amounts Applicable to LGAC
Overcollections and Amounts Capitalized) $25,098 $21,614 $18,268
Income Taxes (Net of Refunds) $4,820 $12,037 $4,382
<FN>
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
SJG-24
SOUTH JERSEY GAS COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Entity - The consolidated financial statements present the
accounts of South Jersey Gas Company (the Company or SJG) and its wholly
owned statutory trust subsidiary, SJG Capital Trust. South Jersey
Industries, Inc. (SJI) owns all of the outstanding common stock of SJG.
Certain reclassifications have been made of previously reported amounts to
conform with classifications used in the current year.
Estimates and Assumptions - Our financial statements are prepared to
conform with generally accepted accounting principles. Management makes
estimates and assumptions that affect the amounts reported in the financial
statements and related disclosures. Therefore, actual results could differ
from those estimates.
Regulation - SJG is subject to the rules and regulations of the New
Jersey Board of Public Utilities (BPU). We maintain our accounts according
to the BPU's prescribed Uniform System of Accounts (See Note 2).
Utility Revenues - SJG bills customers monthly. For customers not
billed at the end of each month, an accrual is made to recognize unbilled
revenues from the date of the last bill to the end of the month.
The BPU allows SJG to recover the excess cost of gas sold over the cost
included in base rates through the Levelized Gas Adjustment Clause (LGAC).
We collect these costs on a forecasted basis upon BPU order. SJG defers
under- or over-recoveries of gas costs and includes them in the following
year's LGAC. We pay interest on overcollected LGAC balances based on SJG's
return on rate base determined in base rate proceedings (See Note 2).
SJG's tariff also includes a Temperature Adjustment Clause (TAC), a
Remediation Adjustment Clause (RAC) and a Demand Side Management Clause
(DSMC). Our TAC reduces the impact of temperature fluctuations on SJG and
its customers. The RAC recovers remediation costs of former gas
manufacturing plants and the DSMC recovers costs associated with our
conservation plan. TAC adjustments affect revenue, income and cash flows
since colder-than-normal weather can generate credits to customers, while
warmer-than-normal weather during the winter season can result in additional
billings. RAC adjustments do not directly affect earnings because we defer
and recover these costs through rates over 7-year amortization periods (See
Notes 2 & 12). DSMC adjustments are not significant and do not affect
earnings.
Property, Plant & Equipment - For regulatory purposes, utility plant is
stated at original cost. The cost of adding, replacing and renewing property
is charged to the appropriate plant account.
SJG-25
1999 1998
-------- --------
Utility Plant:
Production Plant $ 967 $ 967
Storage Plant 8,522 8,467
Transmission Plant 95,175 88,135
Distribution Plant 588,479 553,227
General Plant 25,068 25,417
Intangible Plant 267 267
-------- --------
Utility Plant in Service 718,478 676,480
Construction Work in Progress 1,538 2,195
Gas Stored - Base Gas 1,322 1,322
-------- --------
Total Utility Plant $721,338 $679,997
======== ========
Depreciation and Amortization - We depreciate utility plant on a
straight-line basis over the estimated remaining lives of the various
property classes. These estimates are periodically reviewed and adjusted as
required after BPU approval. The composite annual rate for all depreciable
utility property was approximately 2.8% in 1999, 1998 and 1997. Except for
extraordinary retirements, accumulated depreciation is charged with the cost
of depreciable utility property retired, and removal costs less salvage.
The gas plant acquisition adjustment is amortized on a straight-line basis
over 40 years. The unamortized balance of $1.8 million at December 31, 1999,
is not included in the rate base.
New Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for the first
quarter of our fiscal year ending December 31, 2001. This statement
establishes accounting and reporting standards for derivative instruments,
including those embedded in other contracts, and for hedging activities. It
requires recognizing derivatives as assets or liabilities at fair value on
the balance sheet. We are currently evaluating the effects of FASB No. 133
on the Company's financial condition and results of operations, which will
vary based on our use of derivative instruments at the time of adoption.
Income and Other Taxes - Deferred Income Taxes are provided for all
significant temporary differences between book and taxable income (See Notes
5 & 6).
New Jersey adopted legislation reforming energy taxation in 1997. The
law eliminated the Gross Receipts & Franchise Tax (GRAFT) of approximately
13% of utility revenue, replacing it with a combination of taxes. Beginning
January 1, 1998, retail sales and transportation of natural gas, electricity
and utility services are subject to the 6% State Sales and Use Tax (SUT).
Gas and electric utilities are also subject to the 9% State Corporation
Business Tax (CBT). To bridge the revenue gap the law created, the State
imposed a Transitional Energy Facilities Assessment (TEFA) on gas volumes
sold and transported. The TEFA is being phased out over 5 years beginning
January 1, 1999. The revised tax policy is expected to eliminate tax
differences between utility and non-utility suppliers, providing fair
competition and lower energy costs for consumers. The legislation requires
SJG to prepay taxes which, depending on weather, may not materialize as
expense during that same year. Any remaining balance of these prepayments
is settled up in the subsequent year. Additionally, the SUT is not included
in reported utility revenues or tax expense, as GRAFT was previously.
Therefore, there are equal reductions in these line items on the statements
of consolidated income (See Note 5).
Statements of Cash Flows - For purposes of reporting cash flows, highly
liquid investments with original maturities of 3 months or less are
considered cash equivalents.
SJG-26
2. RECENT REGULATORY ACTIONS:
In January 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. Additionally, SJG's threshold for sharing pre-tax margins generated
by interruptible and off-system sales and transportation (Sharing Formula)
increased from $4.0 million to $5.0 million. With the completion of major
construction projects, this $5.0 million threshold increased by $500,000 in
1997 and by another $2.0 million in 1998. SJG keeps 100% of pre-tax margins
up to the threshold level and 20% of such margins above that level. In
October 1998, the BPU approved a revision to the Sharing Formula as part of
an agreement to modify SJG's TAC. The revision credits the first $750,000
above the current threshold level to the LGAC customers. Thereafter, SJG
keeps 20% of the pre-tax margins as it has historically.
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 initial enrollment period, nearly 13,000 residential
customers applied for this service. The BPU subsequently expanded the number
of potential participants to 50,000 and, as of December 31, 1999, enrollment
totaled 35,683. Effective January 10, 2000, the BPU approved full unbundling
of SJG's system. This allows all natural gas consumers to select their
supplier, lifting the previously existing cap of 50,000 residential
customers. Participants' 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. While the program reduces utility revenues, it does not affect SJI's
net income, financial condition or margins.
In June 1998, SJG filed a petition with the BPU requesting a change to
the TAC. The request was granted in October 1998. As a result, SJG
experiences reduced fluctuations in income when weather is warmer or colder
than normal.
In August 1998, SJG filed with the BPU to recover increased remediation
costs expended from August 1995 through July 1998. In September 1999, the
BPU approved the requested annual recovery level of $6.5 million. This
represents an annual increase of approximately $4.5 million over the
recovery previously included in rates. In July 1999, SJG filed its annual
RAC with the BPU requesting recovery of carrying costs on unrecovered
remediation costs and proposed no change in the current RAC rate for the
next 3 years. In January 2000, the BPU approved the recovery of carrying
costs on unrecovered remediation costs and SJG's proposal to keep its
current RAC rate in effect through October, 2002.
In September 1998, SJG filed its annual LGAC, TAC and DSMC with the BPU.
The LGAC and DSMC cover the period November 1 through October 31 of each
year. The TAC period runs from October 1 through May 31. In May 1999, the
BPU approved a $7.1 million increase in rates as part of this filing, which
included the results of the previous two annual filings. We are currently in
the process of preparing the 1999 annual filing which should be made with
the BPU during the first quarter of 2000.
In February 1999, the Electric Discount and Energy Competition Act
became law. This law established "unbundling", where redesigned utility rate
structures allow natural gas & electric consumers to choose their energy
supplier. SJG filed its unbundling proposal in April 1999 and received final
BPU approval in January 2000.
In addition to allowing all customers to select their own supplier
effective January 10, 2000, the unbundling approval also created an
incentive to customers to select a supplier, other than SJG, in the form of
a Market Development Credit (MDC). This credit will be provided to customers
over the next two years and will approximate $2.5 million plus carrying
costs through December 2001. The majority of this credit was provided for on
SJG's books as a Deferred Credit. Therefore, the impact of the MDC will not
materially impact future periods.
SJG-27
Also included in the proposal was the approved recovery of carrying
costs on the RAC, as previously discussed, and a modification to SJG's LGAC.
Under-recovered gas costs of $11.9 million as of October 31, 1999, and
carrying costs thereon, will be recovered over a 3 years. The LGAC for the
period starting November 1999, will continue to operate as it has in the
past (See Note 1).
3. RELATED PARTY TRANSACTIONS:
SJG had contracted with R & T Group, Inc. (R&T), a wholly owned
subsidiary of SJI, for general utility construction and environmental
remediation services costing approximately $1.9 million for the year ended
December 31, 1997. SJI 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 $5,172,500, $970,200, and $48,200 for the years ended
December 31, 1999, 1998, and 1997, respectively. The amount due from SJE
relating to these sales was $511,700 and $354,900 at December 31, 1999 and
1998, respectively.
4. PREFERRED STOCK AND SECURITIES:
Redeemable Cumulative Preferred Stock - Annually, SJG is required to
offer to purchase 900 and 1,500 shares of its Cumulative Preferred Stock,
Series A and Series B, respectively, at par value, plus accrued dividends.
If preferred stock dividends are in arrears, SJG may not declare or pay
dividends or make distributions on its Common Stock. Preferred Shareholders
may elect a majority of SJG's directors if four or more quarterly dividends
are in arrears.
Mandatorily Redeemable Preferred Securities - In May 1997, SJG's
statutory trust subsidiary, SJG Capital Trust (Trust), sold $35 million of
8.35% SJG-Guaranteed Mandatorily Redeemable Preferred Securities. The
Trust's only assets are the 8.35% Deferrable Interest Subordinated
Debentures issued by SJG maturing April, 2037. This is also the maturity
date of the Preferred Securities. The Debentures and Preferred Securities
are redeemable at SJG's option at a price equal to 100% of the principal
amount at any time on or after April 30, 2002.
5. INCOME AND OTHER TAXES:
SJG is included in the consolidated Federal income tax return filed by
SJI. The actual taxes, including credits, are allocated by SJI to its
subsidiaries generally on a separate return basis. Total income taxes
applicable to operations differs from the tax that would have resulted by
applying the statutory Federal Income Tax rate to pre-tax income for the
following reasons (in thousands):
1999 1998 1997
------- ------- -------
Tax at Statutory Rate $11,255 $ 8,441 $11,069
Increase (Decrease) Resulting from:
State Income Taxes 3,841 3,126 -
Amortization of Investment
Tax Credits (ITC) (390) (393) (393)
Tax Depreciation Under Book
Depreciation on Utility Plant 664 664 664
Other - Net 85 418 219
------- ------- -------
Income Taxes $15,455 $12,256 $11,559
======= ======= =======
SJG-28
The provision for Income Taxes is comprised of the following (in
thousands):
1999 1998 1997
------- ------- -------
Current:
Federal $ 5,490 $ 3,637 $ 5,461
State 3,189 2,204 -
------- ------- -------
Total Current 8,679 5,841 5,461
------- ------- -------
Deferred:
Federal -
Excess of Tax Depreciation Over
Book Depreciation - Net 5,479 5,305 4,496
Deferred Fuel Costs 1,909 1,397 349
Environmental Remediation Costs - Net (1,087) 1,962 2,017
Alternative Minimum Tax 589 (2,622) -
Other - Net (149) (174) (371)
State 425 940 -
------- ------- -------
Total Deferred 7,166 6,808 6,491
ITC (390) (393) (393)
------- ------- -------
Income Taxes $15,455 $12,256 $11,559
======= ======= =======
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting and income tax purposes. Significant components of SJG's
net deferred tax liability at December 31 are (in thousands):
1999 1998
------- -------
Deferred Tax Liabilities:
Tax Depreciation Over Book Depreciation $70,263 $66,865
Between Book and Tax Basis of Property 6,478 5,952
Deferred Fuel Costs 9,235 6,835
Deferred Regulatory Costs 1,301 727
Environmental Remediation Costs 8,778 10,062
Excess Protected 3,355 3,420
GRAFT 1,022 1,214
Other 442 710
------- -------
Total Deferred Tax Liabilities 100,874 95,785
------- -------
Deferred Tax Assets:
Alternative Minimum Tax 1,663 3,465
ITC Basis Gross Up 2,601 2,802
Deferred State Taxes 705 167
Other 2,362 1,993
------- -------
Total Deferred Tax Assets 7,331 8,427
------- -------
Net Deferred Tax Liability $93,543 $87,358
======= =======
As of December 31, 1999 and 1998, income taxes due from(to) SJI were
approximately $1.5 and $3.4 million, respectively.
SJG-29
The significant components of Other Taxes are (in thousands):
1999 1998 1997
------- ------- -------
TEFA $ 7,637 $ 7,378 $ -
GRAFT 197 123 27,361
Other 3,157 2,842 2,963
------- ------- -------
Total Other Taxes $10,991 $10,343 $30,324
======= ======= =======
During 1999 and 1998, SJG recorded an additional $13.4 and $12.0
million, respectively, for SUT on utility services through its consolidated
balance sheet. As an agent for the collection of SUT, we exclude these
amounts from reported revenues and tax expense (See Note 1).
6. REGULATORY ASSETS AND DEFERRED CREDITS - FEDERAL AND OTHER TAXES:
The primary asset created by adopting FASB No. 109, "Accounting for
Income Taxes," was Income Taxes - Flowthrough Depreciation in the amount of
$17.6 million as of January 1, 1993. This amount represented excess federal
tax depreciation over book depreciation on utility plant because of
temporary differences for which, prior to FASB No. 109, deferred taxes
previously were not provided. SJG previously flowed these tax benefits
through to ratepayers. SJG is recovering the amortization of the regulatory
asset through rates over 18 years which began in December 1994.
The ITC attributable to SJG was deferred and continues to be amortized
at the annual rate of 3%, which approximates the life of related assets.
SJG deferred $11.8 million resulting from a change in the basis for
accruing GRAFT in 1978, and is amortizing it on a straight-line basis to
operations over 30 years beginning that same year.
7. LONG-TERM DEBT: (A)
Principal Outstanding
December 31,
(In Thousands)
1999 1998
-------- --------
First Mortgage Bonds: (B)
8.19% Series due 2007 $ 18,181 $ 20,454
10.25% Series due 2008 15,908 20,454
9% Series due 2010 24,062 26,250
6.12% Series due 2010 (C) 10,000 10,000
6.95% Series due 2013 35,000 35,000
7.125% Series due 2018 (C) 20,000 20,000
7.7% Series due 2027 35,000 35,000
Unsecured Notes:
Term Note, 8.47% due 2001 4,286 6,428
Debenture Notes, 8.6% due 2010 30,000 30,000
-------- --------
Total Long-Term Debt Outstanding 192,437 203,586
Less Current Maturities 8,876 8,876
-------- --------
Long-Term Debt $183,561 $194,710
======== ========
(A) Long-Term Debt Maturities and Sinking Fund Requirements for the
succeeding five years are as follows: 2000, $8,876; 2001, $11,876;
2002, $9,734; 2003, $12,884; and 2004, $12,884.
SJG-30
(B) SJG's First Mortgage dated October 1, 1947, as supplemented, securing
the First Mortgage Bonds constitutes a direct first mortgage lien on
substantially all utility plant. The First Mortgage Bonds also require
an annual replacement fund, which may be met by the deposit of cash
funds with the Trustee or by using bondable property additions at
166.6% of cash requirements. SJG expects to continue to satisfy this
requirement with property additions in each of the next five years.
(C) On October 21, 1998, SJG issued $30 million of debt under a Medium Term
Note Program established October 5, 1998. A total of $100 million is
authorized to be issued under this program through December 2001.
8. FINANCIAL INSTRUMENTS:
Long-Term Debt - The fair values of SJG's long-term debt, including
current maturities, as of December 31, 1999 and 1998, are estimated to be
$190.1 million and $227.0 million, respectively. Carrying amounts are $192.4
million and $203.6 million, respectively. The estimates are based on the
interest rates available to SJG at the end of each year for debt with
similar terms and maturities. SJG retires debt when it is cost effective as
permitted by the debt agreements.
Other Financial Instruments - The carrying amounts of SJG's other
financial instruments approximate their fair values at December 31, 1999 and
1998.
9. UNUSED LINES OF CREDIT AND COMPENSATING BALANCES:
Unused lines of credit available at December 31, 1999, were $10.1
million. Borrowings under these lines of credit are at market rates. The
weighted borrowing cost, which changes daily, was 6.45% and 5.81% at
December 31, 1999 and 1998, respectively. Demand deposits are maintained
with lending banks on an informal basis and do not constitute compensating
balances.
10. RETAINED EARNINGS:
Restrictions exist under various loan agreements regarding the amount
of cash dividends or other distributions that we may pay on SJG's common
stock. SJG's retained earnings, which is free of these restrictions, was
approximately $56.6 million as of December 31, 1999.
SJG received an equity infusion of $5.25 million from SJI on June 30,
1999. On July 30, 1999, SJI contributed an additional $9.75 million of
equity capital to SJG. Future equity contributions will occur on an as
needed basis.
11. PENSIONS & OTHER POSTRETIREMENT BENEFITS:
SJG participates in the defined benefit retirement plans of SJI. The
pension plans provide annuity payments to substantially all full-time,
regular employees upon retirement. The other postretirement benefit plans
provide health care and life insurance benefits to some retirees.
The BPU authorized SJG to recover costs related to postretirement
benefits other than pensions under the accrual method of accounting
consistent with FASB No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Amounts accrued prior to that authorization
were deferred and are being amortized as allowed by the BPU. The unamortized
balance amounting to $4.9 million at December 31, 1999, is recoverable in
rates. We are amortizing this amount over 15 years which started January
1998.
SJG-31
Net periodic benefit cost related to the pension and other
postretirement benefit insurance plans, consisted of the following
components (in thousands):
Pension Benefits Other Benefits
1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------
Service cost $2,184 $1,850 $1,858 $1,064 $ 882 $ 963
Interest cost 4,071 3,814 3,598 1,551 1,457 1,540
Expected return on
plan assets (4,139) (3,742) (3,171) (675) (417) (272)
Amortization of
transition obligation 87 87 87 755 779 779
Amortization of loss
(gain) and other 398 258 292 - (9) -
------ ------ ------ ------ ------ ------
Net periodic benefit cost $2,601 $2,267 $2,664 $2,695 $2,692 $3,010
====== ====== ====== ====== ====== ======
A reconciliation of the Plans' benefit obligations, fair value of plan
assets, funded status and amounts recognized in SJG's consolidated balance
sheets follows (in thousands):
Pension Benefits Other Benefits
1999 1998 1999 1998
------- -------- -------- --------
Change in Benefit Obligation:
Benefit obligation at
beginning of year $ 59,331 $ 50,210 $ 23,637 $ 23,428
Service cost 2,184 1,850 1,064 882
Interest cost 4,071 3,814 1,551 1,457
Plan amendments - - - -
Actuarial (gain) loss and other (8,113) 5,495 (3,503) (1,412)
Benefits paid (2,282) (2,038) (655) (718)
-------- -------- -------- --------
Benefit obligation at end of year $ 55,191 $ 59,331 $ 22,094 $ 23,637
======== ======== ======== ========
Change in Plan Assets:
Fair value of plan assets at
beginning of year $ 43,937 $ 41,993 $ 6,972 $ 4,403
Actual return on plan assets 4,791 2,466 392 568
Employer contributions 2,458 1,516 2,763 2,719
Benefits paid (2,282) (2,038) (655) (718)
-------- -------- -------- --------
Fair value of plan assets at
end of year $ 48,904 $ 43,937 $ 9,472 $ 6,972
======== ======== ======== ========
Funded status $ (6,287) $(15,394) $(12,622) $(16,665)
Unrecognized prior service cost 2,327 2,552 - -
Unrecognized net transition
obligation 348 435 9,823 10,579
Unrecognized net loss (gain)
and other 303 9,240 (3,670) (451)
-------- -------- -------- --------
Accrued net benefit cost at
end of year $ (3,309) $ (3,167) $ (6,469) $ (6,537)
======== ======== ======== ========
The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for the pension plan with accumulated benefit
obligations in excess of plan assets as of December 31, 1998, were $35.2
SJG-32
million, $28.4 million, and $26.2 million, respectively. As of December 31,
1999, the accumulated benefit obligations did not exceed plan assets.
Assumptions used in the accounting for these plans were:
Pension Benefits Other Benefits
1999 1998 1999 1998
------- -------- -------- --------
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase 4.60% 4.10% - -
The assumed health care cost trend rates used in measuring the
accumulated postretirement benefit obligation as of December 31, 1999, are:
Medical and Drug - 6.0% in 1999 for participants age 65 or older, grading to
5.5% in 2001, and 7.5% in 1999 for participants under age 65, grading to
5.5% in 2005. Dental - 7.0% in 1999, grading to 5.5% in 2005.
A 1% change in the assumed health care cost trend rates for SJG's
postretirement health care plans in 1999 would have the following effects
(in thousands):
1% Increase 1% Decrease
----------- -----------
Effect on the aggregate of the service
and interest cost components $ 443 $ (356)
Effect on the postretirement benefit obligation $ 2,989 $(2,451)
12. COMMITMENTS AND CONTINGENCIES:
Construction and Environmental Commitments - SJG's estimated net cost
of construction and environmental remediation programs for 2000 totals $49.8
million. Commitments were made regarding some of these programs.
Gas Supply Contracts - SJG, in the normal course of conducting
business, has entered into long-term contracts for natural gas supplies,
firm transportation and gas storage service. The earliest that any of these
contracts expires is 2000. The transportation and storage service agreements
between SJG and its interstate pipeline suppliers were made under Federal
Energy Regulatory Commission approved tariffs. SJG's cumulative obligation
for demand charges and reservation fees paid to suppliers for these services
is approximately $4.8 million per month, recovered on a current basis
through the LGAC.
Pending Litigation - SJG is subject to claims arising from the ordinary
course of business and other legal proceedings. We set up reserves when
these claims become apparent. We also maintain insurance and record probable
insurance recoveries relating to outstanding claims.
Environmental Remediation Costs - SJG incurred and recorded costs for
environmental clean up of sites where SJG or its predecessors operated gas
manufacturing plants. SJG stopped manufacturing gas in the 1950s.
Since the early 1980s, SJG recorded environmental remediation costs of
$109.6 million, of which $58.5 million was spent as of December 31, 1999.
With the assistance of an outside consulting firm, we estimate that future
costs to clean up SJG's sites will range from $51.0 million to $161.3
million. We recorded the lower end of this range as a liability. It is
reflected on the 1999 consolidated balance sheet under the captions Current
SJG-33
Liabilities and Deferred Credits and Other Non-Current Liabilities (See Note
1). SJG did not adjust the accrued liability for future insurance
recoveries, which we have been successful in pursuing. We 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.
SJG has two regulatory assets associated with environmental cost. The
first asset is titled Environmental Remediation Cost: Expended - Net. These
expenditures represent what was actually spent to clean up former gas
manufacturing plant sites. These costs meet the requirements of FASB No.
71, "Accounting for the Effects of Certain Types of Regulation." The BPU
allows SJG to recover expenditures through July 1998 and petitions to
recover costs through July 1999 are pending (See Note 2).
The other 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 on the
consolidating balance sheet under the captions, Current Liabilities and
Deferred Credits and Other Non-Current Liabilities. The deferred debit is a
regulatory asset under FASB No. 71. The BPU's intent, evidenced by current
practice, is to allow SJG to recover the deferred costs after they are
spent.
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 December 31, 1999, SJG's unamortized
remediation costs of $25.7 million are reflected on the consolidated balance
sheet under the caption Regulatory and Other Non-Current Assets. Since
implementing the RAC in 1992, SJG recovered $21.6 million through rates as
of December 31, 1999 (See Note 2).
SJG-34
13. QUARTERLY RESULTS OF OPERATIONS - UNAUDITED:
The summarized quarterly results of SJG's operations, in thousands
except for per share amounts:
<TABLE>
<CAPTION>
1999 Quarter Ended 1998 Quarter Ended
------------------------------------------ ------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $135,082 $66,650 $51,693 $97,496 $108,485 $52,219 $43,517 $94,849
--------- --------- --------- --------- --------- --------- --------- ---------
Operating Expenses:
Operation and Maintenance
Including Fixed Charges 99,118 64,348 57,385 80,159 81,336 50,813 47,378 79,033
Income Taxes 12,718 127 (2,990) 5,600 9,672 (223) (2,329) 5,136
Other Taxes 4,456 1,832 1,492 3,211 3,884 1,994 1,576 2,889
--------- --------- --------- --------- --------- --------- --------- ---------
Income (Loss) before
Preferred Dividend
Requirements 18,790 343 (4,194) 8,526 13,593 (365) (3,108) 7,791
Preferred Dividend
Requirements 772 772 769 770 773 772 771 773
--------- --------- --------- --------- --------- --------- --------- ---------
Net Income (Loss) Applicable
to Common Stock $18,018 ($429) ($4,963) $7,756 $12,820 ($1,137) ($3,879) $7,018
========= ========= ========= ========= ========= ========= ========= =========
Earnings Per Common
Share (Based on Average
Shares Outstanding):(1) $7.70 ($0.18) ($2.12) $3.32 $5.48 ($0.49) ($1.66) $3.00
========= ========= ========= ========= ========= ========= ========= =========
Average Shares Outstanding 2,339 2,339 2,339 2,339 2,339 2,339 2,339 2,339
<FN>
(1) The sum of the quarters for 1999 and 1998 does not equal the year's total due to rounding.
NOTE: Because of the seasonal nature of the business, statements for the 3-month periods are not
indicative of the results for a full year.
</FN>
</TABLE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
SJG-35
PART III
Item 10. Directors and Executive Officers of the Registrant
Not applicable.
Item 11. Executive Compensation
Not applicable.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Not applicable.
Item 13. Certain Relationships and Related Transactions
Not applicable.
SJG-36
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) Listed below are all financial statements and schedules filed as part
of this report:
1 - The consolidated financial statements and notes to consolidated
financial statements together with the report thereon of Deloitte & Touche LLP,
dated February 16, 2000. See Item 8.
2 - Supplementary Financial Information
Supplemental Schedules as of December 31, 1999, 1998 and 1997 and for
the three years ended December 31, 1999, 1998, and 1997:
The Independent Auditors' Report of Deloitte & Touche LLP, Auditors of
the Company. See Item 8.
Schedule II - Valuation and Qualifying Accounts. See page 46.
All schedules, other than that listed above, are omitted because the
information called for is included in the financial statements filed or because
they are not applicable or are not required.
3 - See Item 14(c)(13)
(b) Reports on Form 8-K - None.
(c) List of Exhibits (Exhibit Number is in Accordance with the Exhibit
Table in Item 601 of Regulation S-K).
Exhibit
Number Description/Reference
(3)(a) Certificate of Incorporation of South Jersey Gas Company.
Incorporated by reference from Exhibit (3)(a) of Form 10 filed
March 7, 1997.
(3)(b) Bylaws of South Jersey Gas Company, as amended and restated
through June 19, 1998. Incorporated by reference from Exhibit
(3)(b) of Form 10-K for 1998 (1-6364).
(4)(a) Form of Stock Certified for Common Stock. Incorporated by
reference from Exhibit (4)(a) of Form 10 filed March 7, 1997.
(4)(b)(i) First Mortgage Indenture dated October 1, 1947. Incorporated by
reference from Exhibit (4)(b)(i) of Form 10-K of SJI for 1987
(1-6364).
(4)(b)(iv) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 of SJI
(2-68038).
(4)(b)(xiv) Sixteenth Supplemental Indenture dated as of April 1, 1988,
10 1/4% Series due 2008. Incorporated by reference from Exhibit
(4)(b)(xv) of Form 10-Q of SJI for the quarter ended March 31,
1988 (1-6364).
(4)(b)(xv) Seventeenth Supplemental Indenture dated as of May 1, 1989.
Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K of
SJI for 1989 (1-6364).
SJG-37
Exhibit
Number Description/Reference
(4)(b)(xvi) Eighteenth Supplemental Indenture dated as of March 1, 1990.
Incorporated by reference from Exhibit (4)(e) of Form S-3 of SJI
(33-36581).
(4)(b)(xvii) Nineteenth Supplemental Indenture dated as of April 1, 1992.
Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10-K
of SJI for 1992 (1-6364).
(4)(b)(xviii) Twentieth Supplemental Indenture dated as of June 1, 1993.
Incorporated by reference from Exhibit (4)(b)(xviii) of Form 10-K
of SJI for 1993(1-6364).
(4)(b)(xix) Twenty-First Supplemental Indenture dated as of March 1, 1997.
Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-K
of SJI for 1997 (1-6364).
(4)(b)(xx) Twenty-Second Supplemental Indenture dated as of October 1,
1998. Incorporated by reference from Exhibit (4)(b)(ix) of
Form S-3 (333-62019).
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture Notes due
February 1, 2010. Incorporated by reference from Exhibit (4)(c) of
Form 10-K of SJI for 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated by
reference from Exhibit 3(a) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by reference
from Exhibit 3(b) of Form S-3 - SJG Capital Trust and South Jersey
Gas Company as filed March 27, 1997, as amended April 18, 1997 and
April 23, 1997 (333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG Capital
Trust. Incorporated by reference from Exhibit 3(c) of Form S-3 -
SJG Capital Trust and South Jersey Gas Company as filed March 27,
1997, as amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iii) Form of Preferred Security for SJG Capital Trust. Incorporated by
reference from Exhibit 4(a) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (33 3-24065).
(4)(d)(iv) Form of Deferrable Interest Subordinated Debenture. Incorporated
by reference from Exhibit 4(b) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (33 3-24065).
SJG-38
Exhibit
Number Description/Reference
(4)(d)(v) Form of Deferrable Interest Subordinated Debenture. Incorporated
by reference from Exhibit 4(c) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (33 3-24065).
(4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas Company and
SJG Capital Trust. Incorporated by reference from Exhibit 4(d) of
Form S-3 - SJG Capital Trust and South Jersey Gas Company as filed
March 27, 1997, as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(e) Medium Term Note Indenture of Trust dated October 1, 1998.
Incorporated by reference from Exhibit (4)(e) of Form S-3
(333-62019).
(10)(a) Gas storage agreement (GSS) between South Jersey Gas Company and
Transco dated October 1, 1993. Incorporated by reference from
Exhibit (10)(d) of Form 10-K of SJI for 1993 (1-6364).
(10)(b) Gas storage agreement (S-2) between South Jersey Gas Company and
Transco dated December 16, 1953. Incorporated by reference from
Exhibit (5)(h) of Form S-7 of SJI (2-56223).
(10)(c) Gas storage agreement (LG-A) between South Jersey Gas Company and
Transco dated June 3, 1974. Incorporated by reference from Exhibit
(5)(f) of Form S-7 of SJI (2-56223).
(10)(d) Gas storage agreement (WSS) between South Jersey Gas Company and
Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(h) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(i) Gas storage agreement (LSS) between South Jersey Gas Company
and Transco dated October 1, 1993. Incorporated by reference from
Exhibit (10)(i) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(ii) Gas storage agreement (SS-1) between South Jersey Gas Company
and Transco dated May 10, 1987 (effective April 1, 1988).
Incorporated by reference from Exhibit (10)(i)(a) of Form 10-K of
SJI for 1988 (1-6364).
(10)(e)(iii) Gas storage agreement (ESS) between South Jersey Gas Company
and Transco dated November 1, 1993. Incorporated by reference from
Exhibit (10)(i)(b) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(iv) Gas transportation service agreement between South Jersey Gas
Company and Transco dated April 1, 1986. Incorporated by reference
from Exhibit (10)(i)(c) of Form 10-K of SJI for 1989 (1-6364).
(10)(e)(v) Service agreement (FS) between South Jersey Gas Company and
Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(i)(e) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(vi) Service agreement (FT) between South Jersey Gas Company and
Transco dated February 1, 1992. Incorporated by reference from
Exhibit (10)(i)(f) of Form 10-K of SJI for 1991 (1-6364).
SJG-39
Exhibit
Number Description/Reference
(10)(e)(vii) Service agreement (Incremental FT) between South Jersey Gas
Company and Transco dated August 1, 1991. Incorporated by
reference from Exhibit (10)(i)(g) of Form 10-K of SJI for 1991
(1-6364).
(10)(e)(viii) Gas storage agreement (SS-2) between South Jersey Gas Company
and Transco dated July 25, 1990. Incorporated by reference from
Exhibit (10)(i)(i) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(ix) Gas transportation service agreement between South Jersey Gas
Company and Transco dated December 20, 1991. Incorporated by
reference from Exhibit (10)(i)(j) of Form 10-K of SJI for 1993
(1-6364).
(10)(e)(x) Amendment to gas transportation agreement dated December 20,
1991 between South Jersey Gas Company and Transco dated October 5,
1993. Incorporated by reference from Exhibit (10)(i)(k) of Form
10-K of SJI for 1993 (1-6364).
(10)(f) Gas transportation service agreement (FTS) between South Jersey
Gas Company and Equitable Gas Company dated November 1, 1986.
Incorporated by reference from Exhibit (10)(j)(a) of Form 10-K of
SJI for 1989 (1-6364).
(10)(g)(i) Gas transportation service agreement (TF) between South Jersey
Gas Company and CNG Transmission Corporation dated October 1,
1993. Incorporated by reference from Exhibit (10)(k)(h) of Form
10-K of SJI for 1993 (1-6364).
(10)(g)(ii) Gas purchase agreement between South Jersey Gas Company and
ARCO Gas Marketing, Inc. dated March 5, 1990. Incorporated by
reference from Exhibit (10)(k)(i) of Form 10-K of SJI for 1989
(1-6364).
(10)(g)(iii) Gas transportation service agreement (FTS-1) between South
Jersey Gas Company and Columbia Gulf Transmission Company dated
November 1, 1993. Incorporated by reference from Exhibit
(10)(k)(k) of Form 10-K of SJI for 1993 (1-6364).
(10)(g)(iv) Assignment agreement capacity and service rights (FTS-2)
between South Jersey Gas Company and Columbia Gulf Transmission
Company dated November 1, 1993. Incorporated by reference from
Exhibit (10)(k)(i) of Form 10-K of SJI for 1993 ( 1-6364).
(10)(g)(v) FTS Service Agreement No. 39556 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November
1, 1993. Incorporated by reference from Exhibit (10)(k)(m) of Form
10-K of SJI for 1993 (1-6364).
(10)(g)(vi) FTS Service Agreement No. 38099 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November
1, 1993. Incorporated by reference from Exhibit (10)(k)(n) of Form
10-K of SJI for 1993 (1-6364).
SJG-40
Exhibit
Number Description/Reference
(10)(g)(vii) NTS Service Agreement No. 39305 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993.
Incorporated by reference from Exhibit (10)(k)(o) of Form 10-K of
SJI for 1993 (1-6364).
(10)(g)(viii) FSS Service Agreement No. 38130 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993.
Incorporated by reference from Exhibit (10)(k)(p) of Form 10-K of
SJI for 1993 (1-6364).
(10)(g)(ix) SST Service Agreement No. 38086 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993.
Incorporated by reference from Exhibit (10)(k)(q) of Form 10-K of
SJI for 1993 (1-6364).
(10)(g)(x) NS (Negotiated Sales) Service Agreement dated December 1, 1994
between South Jersey Gas Company and Transco Gas Marketing Company
as agent for Transcontinental Gas Pipeline. Incorporated by
reference from Exhibit (10)(k)(r) of Form 10-K of SJI for 1994
(1-6364).
(10)(h)(i)* Deferred Payment Plan for Directors of South Jersey Industries,
Inc., South Jersey Gas Company, Energy & Minerals, Inc., R&T
Group, Inc. and South Jersey Energy Company as amended and
restated October 21, 1994. Incorporated by referen ce from Exhibit
(10)(l) of Form 10-K of SJI for 1994 (1-6364).
(10)(h)(ii)* Form of Deferred Compensation Agreement between South Jersey
Industries, Inc. and/or a subsidiary and seven of its officers.
Incorporated by reference from Exhibit (10)(j)(a) of Form 10-K of
SJI for 1980 (1-6364).
(10)(h)(iii)* Schedule of Deferred Compensation Agreements. Incorporated by
reference from Exhibit (10)(l)(b) of Form 10-K of SJI for 1997
(1-6364).
(10)(h)(iv)* Supplemental Executive Retirement Program, as amended and
restated effective July 1, 1997, and Form of Agreement between
certain South Jersey Industries, Inc. or subsidiary Company
officers. Incorporated by reference from Exhibit (10)(l)(i) of
Form 10-K of SJI for 1997 (1-6364).
(10)(h)(v)* Form of Officer Employment Agreement between certain officers and
either South Jersey Industries, Inc. or its subsidiaries.
Incorporated by reference from Exhibit (10)(l)(d) of Form 10-K of
SJI for 1994 (1-6364).
(10)(h)(vi)* Schedule of Officer Employment Agreements. Incorporated by
reference from Exhibit (10)(l)(e) of Form 10-K of SJI for 1998
(1-6364).
(10)(h)(vii)* Officer Severance Benefit Program for all officers. Incorporated
by reference from Exhibit (10)(l)(g) of Form 10-K of SJI for 1985
(1-6364).
SJG-41
Exhibit
Number Description/Reference
(10)(h)(viii)* Discretionary Incentive Bonus Program for all officers and
management employees. Incorporated by reference from Exhibit
(10)(l)(h) of Form 10-K of SJI for 1985 (1-6364).
(10)(h)(ix)* The 1987 Stock Option and Stock Appreciation Rights Plan including
Form of Agreement. Incorporated by reference from Exhibit
(10)(l)(i) of Form 10-K of SJI for 1987 (1-6364).
(12) Calculation of Ratio of Earnings to Fixed Charges (Before Federal
Income Taxes) (filed herewith).
(21) Subsidiaries of the Registrant (filed herewith).
(23) Independent Auditors' Consent (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (submitted only in electronic format to
the Securities and Exchange Commission).
* Constitutes a management contract or a compensatory plan or arrangement.
SJG-42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SOUTH JERSEY GAS COMPANY
BY: /s/ David A. Kindlick
David A. Kindlick, Senior Vice President
Finance & Rates
Date March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Charles Biscieglia President and CEO March 30, 2000
(Charles Biscieglia)
/s/ David A. Kindlick Senior Vice President, Finance March 30, 2000
(David A. Kindlick) & Rates
(Principal Financial Officer)
/s/ William J. Smethurst, Jr. Vice President and Treasurer March 30, 2000
(William J. Smethurst, Jr.) (Principal Accounting Officer)
/s/ George L. Baulig Senior Vice President & March 30, 2000
(George L. Baulig) Corporate Secretary
/s/ Shirli M. Billings Director March 30, 2000
(Shirli M. Billings)
/s/ Sheila H. Coco Director March 30, 2000
(Sheila H. Coco)
SJG-43
Signature Title Date
/s/ Richard L. Dunham Director March 30, 2000
(Richard L. Dunham)
/s/ Clarence D. McCormick Director March 30, 2000
(Clarence D. McCormick)
/s/ Frederick R. Raring Director March 30, 2000
(Federick R. Raring)
SJG-44
INDEPENDENT AUDITORS' REPORT
To the Shareholder and Board of Directors of
South Jersey Gas Company:
We have audited the consolidated financial statements of South Jersey
Gas Company and its subsidiary as of December 31, 1999 and 1998, and for each
of the three years in the period ended December 31, 1999, and have issued our
report thereon dated February 16, 2000; such financial statements and report
are included in Item 8 of this report on Form 10K. Our audits also included
the financial statement schedule of South Jersey Gas Company and its
subsidiaries, listed in Item 14(a) 2. This financial statement schedule is the
responsibility of the Corporation's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 16, 2000
SJG-45
<TABLE>
SOUTH JERSEY GAS COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ----------------------------------------------------------------------------------------------------------
Additions
--------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts - Deductions - End
Classification of Period Expenses Describe * Describe ** of Period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1999 $1,032 $972 $336 $1,408 $932
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1998 $1,032 $1,385 $411 $1,796 $1,032
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1997 $1,032 $1,371 $454 $1,825 $1,032
<FN>
* Recoveries of accounts previously written off and minor adjustments.
** Uncollectible accounts written off.
</FN>
</TABLE>
SJG-46
South Jersey Gas Company
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(3)(a) Certificate of Incorporation of South Jersey Gas Company.
Incorporated by reference from Exhibit (3)(a) of Form 10 filed
March 7, 1997.
(3)(b) Bylaws of South Jersey Gas Company, as amended and restated
through June 19, 1998. Incorporated by reference from Exhibit
(3)(b) of Form 10-K for 1998 (1-6364).
(4)(a) Form of Stock Certified for Common Stock. Incorporated by
reference from Exhibit (4)(a) of Form 10 filed March 7, 1997.
(4)(b)(i) First Mortgage Indenture dated October 1, 1947. Incorporated by
reference from Exhibit (4)(b)(i) of Form 10-K of SJI for 1987
(1-6364).
(4)(b)(iv) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 of SJI
(2-68038).
(4)(b)(xiv) Sixteenth Supplemental Indenture dated as of April 1, 1988,
10 1/4% Series due 2008. Incorporated by reference from Exhibit
(4)(b)(xv) of Form 10-Q of SJI for the quarter ended March 31,
1988 (1-6364).
(4)(b)(xv) Seventeenth Supplemental Indenture dated as of May 1, 1989.
Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K of
SJI for 1989 (1-6364).
(4)(b)(xvi) Eighteenth Supplemental Indenture dated as of March 1, 1990.
Incorporated by reference from Exhibit (4)(e) of Form S-3 of SJI
(33-36581).
(4)(b)(xvii) Nineteenth Supplemental Indenture dated as of April 1, 1992.
Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10-K
of SJI for 1992 (1-6364).
(4)(b)(xviii) Twentieth Supplemental Indenture dated as of June 1, 1993.
Incorporated by reference from Exhibit (4)(b)(xviii) of Form 10-K
of SJI for 1993(1-6364).
(4)(b)(xix) Twenty-First Supplemental Indenture dated as of March 1, 1997.
Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-K
of SJI for 1997 (1-6364).
(4)(b)(xx) Twenty-Second Supplemental Indenture dated as of October 1,
1998. Incorporated by reference from Exhibit (4)(b)(ix) of
Form S-3 (333-62019).
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture Notes due
February 1, 2010. Incorporated by reference from Exhibit (4)(c) of
Form 10-K of SJI for 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated by
reference from Exhibit 3(a) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (333-24065).
SJG-47
South Jersey Gas Company
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by reference
from Exhibit 3(b) of Form S-3 - SJG Capital Trust and South Jersey
Gas Company as filed March 27, 1997, as amended April 18, 1997 and
April 23, 1997 (333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG Capital
Trust. Incorporated by reference from Exhibit 3(c) of Form S-3 -
SJG Capital Trust and South Jersey Gas Company as filed March 27,
1997, as amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iii) Form of Preferred Security for SJG Capital Trust. Incorporated by
reference from Exhibit 4(a) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (33 3-24065).
(4)(d)(iv) Form of Deferrable Interest Subordinated Debenture. Incorporated
by reference from Exhibit 4(b) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (33 3-24065).
(4)(d)(v) Form of Deferrable Interest Subordinated Debenture. Incorporated
by reference from Exhibit 4(c) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (33 3-24065).
(4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas Company and
SJG Capital Trust. Incorporated by reference from Exhibit 4(d) of
Form S-3 - SJG Capital Trust and South Jersey Gas Company as filed
March 27, 1997, as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(e) Medium Term Note Indenture of Trust dated October 1, 1998.
Incorporated by reference from Exhibit (4)(e) of Form S-3
(333-62019).
(10)(a) Gas storage agreement (GSS) between South Jersey Gas Company and
Transco dated October 1, 1993. Incorporated by reference from
Exhibit (10)(d) of Form 10-K of SJI for 1993 (1-6364).
(10)(b) Gas storage agreement (S-2) between South Jersey Gas Company and
Transco dated December 16, 1953. Incorporated by reference from
Exhibit (5)(h) of Form S-7 of SJI (2-56223).
SJG-48
South Jersey Gas Company
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(10)(c) Gas storage agreement (LG-A) between South Jersey Gas Company and
Transco dated June 3, 1974. Incorporated by reference from Exhibit
(5)(f) of Form S-7 of SJI (2-56223).
(10)(d) Gas storage agreement (WSS) between South Jersey Gas Company and
Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(h) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(i) Gas storage agreement (LSS) between South Jersey Gas Company
and Transco dated October 1, 1993. Incorporated by reference from
Exhibit (10)(i) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(ii) Gas storage agreement (SS-1) between South Jersey Gas Company
and Transco dated May 10, 1987 (effective April 1, 1988).
Incorporated by reference from Exhibit (10)(i)(a) of Form 10-K of
SJI for 1988 (1-6364).
(10)(e)(iii) Gas storage agreement (ESS) between South Jersey Gas Company
and Transco dated November 1, 1993. Incorporated by reference from
Exhibit (10)(i)(b) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(iv) Gas transportation service agreement between South Jersey Gas
Company and Transco dated April 1, 1986. Incorporated by reference
from Exhibit (10)(i)(c) of Form 10-K of SJI for 1989 (1-6364).
(10)(e)(v) Service agreement (FS) between South Jersey Gas Company and
Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(i)(e) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(vi) Service agreement (FT) between South Jersey Gas Company and
Transco dated February 1, 1992. Incorporated by reference from
Exhibit (10)(i)(f) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(vii) Service agreement (Incremental FT) between South Jersey Gas
Company and Transco dated August 1, 1991. Incorporated by
reference from Exhibit (10)(i)(g) of Form 10-K of SJI for 1991
(1-6364).
(10)(e)(viii) Gas storage agreement (SS-2) between South Jersey Gas Company
and Transco dated July 25, 1990. Incorporated by reference from
Exhibit (10)(i)(i) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(ix) Gas transportation service agreement between South Jersey Gas
Company and Transco dated December 20, 1991. Incorporated by
reference from Exhibit (10)(i)(j) of Form 10-K of SJI for 1993
(1-6364).
(10)(e)(x) Amendment to gas transportation agreement dated December 20,
1991 between South Jersey Gas Company and Transco dated October 5,
1993. Incorporated by reference from Exhibit (10)(i)(k) of Form
10-K of SJI for 1993 (1-6364).
SJG-49
South Jersey Gas Company
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(10)(f) Gas transportation service agreement (FTS) between South Jersey
Gas Company and Equitable Gas Company dated November 1, 1986.
Incorporated by reference from Exhibit (10)(j)(a) of Form 10-K of
SJI for 1989 (1-6364).
(10)(g)(i) Gas transportation service agreement (TF) between South Jersey
Gas Company and CNG Transmission Corporation dated October 1,
1993. Incorporated by reference from Exhibit (10)(k)(h) of Form
10-K of SJI for 1993 (1-6364).
(10)(g)(ii) Gas purchase agreement between South Jersey Gas Company and
ARCO Gas Marketing, Inc. dated March 5, 1990. Incorporated by
reference from Exhibit (10)(k)(i) of Form 10-K of SJI for 1989
(1-6364).
(10)(g)(iii) Gas transportation service agreement (FTS-1) between South
Jersey Gas Company and Columbia Gulf Transmission Company dated
November 1, 1993. Incorporated by reference from Exhibit
(10)(k)(k) of Form 10-K of SJI for 1993 (1-6364).
(10)(g)(iv) Assignment agreement capacity and service rights (FTS-2)
between South Jersey Gas Company and Columbia Gulf Transmission
Company dated November 1, 1993. Incorporated by reference from
Exhibit (10)(k)(i) of Form 10-K of SJI for 1993 ( 1-6364).
(10)(g)(v) FTS Service Agreement No. 39556 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November
1, 1993. Incorporated by reference from Exhibit (10)(k)(m) of Form
10-K of SJI for 1993 (1-6364).
(10)(g)(vi) FTS Service Agreement No. 38099 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November
1, 1993. Incorporated by reference from Exhibit (10)(k)(n) of Form
10-K of SJI for 1993 (1-6364).
(10)(g)(vii) NTS Service Agreement No. 39305 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993.
Incorporated by reference from Exhibit (10)(k)(o) of Form 10-K of
SJI for 1993 (1-6364).
(10)(g)(viii) FSS Service Agreement No. 38130 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993.
Incorporated by reference from Exhibit (10)(k)(p) of Form 10-K of
SJI for 1993 (1-6364).
(10)(g)(ix) SST Service Agreement No. 38086 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993.
Incorporated by reference from Exhibit (10)(k)(q) of Form 10-K of
SJI for 1993 (1-6364).
SJG-50
South Jersey Gas Company
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(10)(g)(x) NS (Negotiated Sales) Service Agreement dated December 1, 1994
between South Jersey Gas Company and Transco Gas Marketing Company
as agent for Transcontinental Gas Pipeline. Incorporated by
reference from Exhibit (10)(k)(r) of Form 10-K of SJI for 1994
(1-6364).
(10)(h)(i)* Deferred Payment Plan for Directors of South Jersey Industries,
Inc., South Jersey Gas Company, Energy & Minerals, Inc., R&T
Group, Inc. and South Jersey Energy Company as amended and
restated October 21, 1994. Incorporated by referen ce from Exhibit
(10)(l) of Form 10-K of SJI for 1994 (1-6364).
(10)(h)(ii)* Form of Deferred Compensation Agreement between South Jersey
Industries, Inc. and/or a subsidiary and seven of its officers.
Incorporated by reference from Exhibit (10)(j)(a) of Form 10-K of
SJI for 1980 (1-6364).
(10)(h)(iii)* Schedule of Deferred Compensation Agreements. Incorporated by
reference from Exhibit (10)(l)(b) of Form 10-K of SJI for 1997
(1-6364).
(10)(h)(iv)* Supplemental Executive Retirement Program, as amended and
restated effective July 1, 1997, and Form of Agreement between
certain South Jersey Industries, Inc. or subsidiary Company
officers. Incorporated by reference from Exhibit (10)(l)(i) of
Form 10-K of SJI for 1997 (1-6364).
(10)(h)(v)* Form of Officer Employment Agreement between certain officers and
either South Jersey Industries, Inc. or its subsidiaries.
Incorporated by reference from Exhibit (10)(l)(d) of Form 10-K of
SJI for 1994 (1-6364).
(10)(h)(vi)* Schedule of Officer Employment Agreements. Incorporated by
reference from Exhibit (10)(l)(e) of Form 10-K of SJI for 1998
(1-6364).
(10)(h)(vii)* Officer Severance Benefit Program for all officers. Incorporated
by reference from Exhibit (10)(l)(g) of Form 10-K of SJI for 1985
(1-6364).
(10)(h)(viii)* Discretionary Incentive Bonus Program for all officers and
management employees. Incorporated by reference from Exhibit
(10)(l)(h) of Form 10-K of SJI for 1985 (1-6364).
(10)(h)(ix)* The 1987 Stock Option and Stock Appreciation Rights Plan including
Form of Agreement. Incorporated by reference from Exhibit
(10)(l)(i) of Form 10-K of SJI for 1987 (1-6364).
(12) Calculation of Ratio of Earnings to Fixed Charges (Before Federal
Income Taxes) (filed herewith).
SJG-51
South Jersey Gas Company
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(21) Subsidiaries of the Registrant (filed herewith).
(23) Independent Auditors' Consent (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (submitted only in electronic format to
the Securities and Exchange Commission).
* Constitutes a management contract or a compensatory plan or arrangement.
SJG-52
<TABLE>
Exhibit 12(a)
SOUTH JERSEY GAS COMPANY
Calculation of Ratio of Earnings To Fixed Charges
(In Thousands)
<CAPTION>
Fiscal Year Ended December 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income* $23,466 $17,910 $22,000 $19,389 $15,991
Income Taxes, Net 15,455 12,256 11,559 10,627 9,278
Fixed Charges** 20,949 19,235 18,103 19,574 19,545
Capitalized Interest (390) (167) (107) (114) (98)
-------------------------------------------------------
Total Available for Coverage $59,480 $49,234 $51,555 $49,476 $44,716
=======================================================
Total Available 2.8x 2.6x 2.9x 2.5x 2.3x
- ---------------------
Fixed Charges
<FN>
* Net Income before Dividends on Preferred Securities and a
Cumulative Effect of a Change in Accounting Principle.
** Fixed charges consist of interest charges (rentals are
not material).
</FN>
</TABLE>
<TABLE>
Exhibit 12(b)
SOUTH JERSEY GAS COMPANY
Calculation of Ratio of Earnings To Fixed Charges
Plus Preferred Security Dividend Requirements
(In Thousands)
<CAPTION>
Fiscal Year Ended December 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $20,382 $14,822 $19,898 $19,215 $15,813
Income Taxes, Net 15,455 12,256 11,559 10,627 9,278
Fixed Charges* 20,949 19,235 18,103 19,574 19,545
Preferred Securities - Dividends 3,084 3,088 2,102 174 178
-------------------------------------------------------
Sub-Total 24,033 22,323 20,205 19,748 19,723
-------------------------------------------------------
Capitalized Interest (390) (167) (107) (114) (98)
-------------------------------------------------------
Total Available for Coverage $59,480 $49,234 $51,555 $49,476 $44,716
=======================================================
Total Available 2.5x 2.2x 2.6x 2.5x 2.3x
- -------------------------
Fixed Charges
<FN>
* Fixed charges consist of interest charges (rentals are not material).
</FN>
</TABLE>
<TABLE>
Exhibit 21
SOUTH JERSEY GAS COMPANY
SUBSIDIARIES OF REGISTRANT
AS OF DECEMBER 31, 1999
<CAPTION>
Percentage of
Voting Securities State of
Owned by Parent Relationship Incorporation
--------------------------------------------------
<S> <C> <C> <C>
South Jersey Gas Company Registrant Parent New Jersey
SJG Capital Trust 100 Subsidiary Delaware
</TABLE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 333-24065 and 333-62019 of South Jersey Gas Company on Form S-3 of our
reports dated February 16, 2000, appearing in this Annual Report on Form 10-K
of South Jersey Gas Company for the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 27, 2000
Exhibit 24
SOUTH JERSEY GAS COMPANY
POWER OF ATTORNEY
Each of the undersigned, in his capacity as an officer or director, or
both, as the case may be, of South Jersey Gas Company, a New Jersey
corporation, does hereby appoint Charles Biscieglia, David A. Kindlick and
George L. Baulig, and each of them, severally, as his or her true and lawful
attorneys or attorney to execute in his or her name, place and stead, in his or
her capacity as a director or officer, or both, as the case may be, of said
corporation, its Annual Report for the fiscal year ended December 31, 1999 on
Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, and
any and all amendments thereto and instruments necessary or incidental in
connection therewith, and to file the same with the Securities and Exchange
Commission; and does hereby provide that each of said attorneys shall have
power to act hereunder with or without the other said attorneys, and shall have
full power of substitution and resubstitution and that each of said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever required to
be done in the premises, as fully and to all intents and purposes as he or she
might or could do in person, hereby ratifying and approving the acts of said
attorneys and each of them.
IN WITNESS WHEREOF, the undersigned have executed this instrument, this
30th day of March 2000.
/s/ Charles Biscieglia
Charles Biscieglia, President and CEO
/s/ Shirli M. Billings
Shirli M. Billings, Director
/s/ Sheila H. Coco
Sheila H. Coco, Director
/s/ Richard L. Dunahm
Richard L. Dunham, Director
/s/ Clarence D. McCormick
Clarence D. McCormick, Director
Exhibit 24
Power of Attorney -- 10-K Page 2 of 2
/s/ Frederick R. Raring
Frederick R. Raring, Director
/s/ George L. Baulig
George L. Baulig, Senior Vice President &
Corporate Secretary
/s/ David A. Kindlick
David A. Kindlick, Senior Vice President
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 530,874
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 99,577
<TOTAL-DEFERRED-CHARGES> 117,442
<OTHER-ASSETS> 2,346
<TOTAL-ASSETS> 750,239
<COMMON> 5,848
<CAPITAL-SURPLUS-PAID-IN> 117,817
<RETAINED-EARNINGS> 58,457
<TOTAL-COMMON-STOCKHOLDERS-EQ> 182,122
35,000
2,044
<LONG-TERM-DEBT-NET> 183,561
<SHORT-TERM-NOTES> 118,900
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,876
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 219,736
<TOT-CAPITALIZATION-AND-LIAB> 750,239
<GROSS-OPERATING-REVENUE> 350,921
<INCOME-TAX-EXPENSE> 15,455
<OTHER-OPERATING-EXPENSES> 291,441
<TOTAL-OPERATING-EXPENSES> 306,896
<OPERATING-INCOME-LOSS> 44,025
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 44,025
<TOTAL-INTEREST-EXPENSE> 20,559
<NET-INCOME> 23,466
3,084
<EARNINGS-AVAILABLE-FOR-COMM> 20,382
<COMMON-STOCK-DIVIDENDS> 16,200
<TOTAL-INTEREST-ON-BONDS> 15,721
<CASH-FLOW-OPERATIONS> 40,604
<EPS-BASIC> 8.71
<EPS-DILUTED> 8.71
