NJ Resources Annual Report 2006 by Decker Design

N EW J ERSEY RESOU RCES 2006 AN N UAL R EPORT

CONSERVE TO PRESERVE

NEW JERSEY RESOURCES 2006 ANNUAL REPORT

1415 Wyckoff Road Post Office Box 1468 Wall, NJ 07719 732-938-1480 njliving.com

SHAREOWNER INFORMATION

Annual Meeting The Annual Shareowners Meeting of New Jersey Resources (the Company) will be held on January 24, 2007, at the Robert B. Meyner Reception Center at the PNC Bank Arts Center in Holmdel, New Jersey. Please refer to your proxy statement for directions.

PHOTOGRAPHY: DESIGN:

Safe, Reliable and Competitively Priced Service Customer Satisfaction Growth Quality Valuing Employees Corporate Citizenship Superior Return

Decker Design, Inc., New York

WE ARE COMMITTED TO ENHANCING OUR CUSTOMERS’ QUALITY OF LIFE BY MEETING THEIR EXPECTATIONS FOR RELIABILITY AND VALUE IN AN ENVIRONMENTALLY RESPONSIBLE WAY, EVERY DAY.

John Madere

Stock Listing The Company’s common stock is traded on the New York Stock Exchange under the ticker symbol NJR. The stock appears as NewJerRes or NJRsc in stock tables in many daily newspapers and business publications. Investor and Media Information Members of the financial community are invited to contact Dennis Puma in Treasury Services at 732-938-1229. Members of the media are invited to contact Michael Kinney in Corporate Communications at 732-938-1031. Correspondence can be sent to New Jersey Resources, 1415 Wyckoff Road, P.O. Box 1468, Wall, NJ 07719. A copy of this Annual Report is also available online at njliving.com. Stock Transfer Agent and Registrar The Transfer Agent and Registrar for the Company’s common stock is Computershare, formerly EquiServe (the Agent). Shareowners with questions about account activity should contact Computershare investor relations representatives between 9 a.m. and 9 p.m. ET by calling toll-free 800-817-3955. Shareowners can also obtain routine information 24 hours a day, seven days a week, by calling toll-free 800-817-3955. Correspondence should be addressed to Computershare Investor Services, P.O. Box 43078, Providence, RI 02940-3078.

2006 Financial Highlights Financial Performance Letter From the Chairman Feature Section Service Territories & Markets Served Corporate Profile Directors and Officers Presenting Our 2006 Form 10-K Form 10-K Shareowner Information

Automatic Dividend Reinvestment Plan The Company offers an Automatic Dividend Reinvestment Plan (the Plan). It provides shareowners, eligible employees of the Company and residential customers of New Jersey Natural Gas and their family members with the convenient opportunity to reinvest their common stock dividends and optional cash payments in additional common stock without paying any fees. Under the Plan, shares will be purchased directly from the Company and/or on the open market at the Company’s discretion. The purchase price of shares of common stock purchased on the open market with reinvested dividends, optional cash payments and payroll deductions will be the average price of all such shares purchased during the relevant purchase period, as defined in the Plan. The purchase price of shares of common stock purchased directly from the Company will be: (i) in the case of shares purchased with reinvested dividends, the average of the high and low sales prices (as reported in The Wall Street Journal, Eastern Edition) of the common stock on the relevant dividend payment date (or the next succeeding business day) or (ii) in the case of shares purchased with optional cash payments and payroll deductions, the average of such high and low sales prices on the cash payment date, as defined in the Plan.

Dividends Dividends on common stock have been declared quarterly by the Board of Directors. Shareowners of record receive their dividend checks from the Agent, unless they have elected to reinvest their dividends through the Plan. The Company offers direct deposit of dividends into shareowners’ bank accounts so the funds are available the same day they are paid. Please contact the Agent for details. Request for Documents The following documents may be obtained when available, without charge upon written request to: Dennis Puma, Manager – Treasury Services, New Jersey Resources, 1415 Wyckoff Road, P.O. Box 1468, Wall, NJ 07719. • Annual Report and Form 10-K • Form 10-Q • Form 8-K • Quarterly Earnings News Release • Audit Committee Charter • Corporate Governance Guidelines • Leadership Development and Compensation Committee Charter • Nominating/Corporate Governance Charter • NJR Code of Conduct • Principal Executive Officer and Senior Financial Officer Code of Ethics These documents, as well as other filings made with the Securities and Exchange Commission, also are available online through njliving.com.

Information in this Annual Report should not be considered a solicitation of the sale or purchase of securities.

Details are contained in the Plan prospectus, which may be obtained from the Agent or the Company.

This Annual Report is printed on paper manufactured with wind-generated energy. It is also manufactured with 30 percent post-consumer waste fiber.

TABLE OF CONTE NTS

1 2 3 6 20 21 22 24 25 ibc

Shareowners with access to the Internet can view their account information online through njliving.com. Click on “New Jersey Resources” from the njliving.com home page, then “Shareholder Account Info.”

Savings derived from using post-consumer recycled fiber:

In memory of James J. Young for his 40 years of dedicated service and many contributions as a valued employee of New Jersey Natural Gas and President of Local 1820, IBEW.

> 66 trees not cut down > 191 pounds water-borne waste not created > 28,137 gallons of wastewater not generated > 3,113 pounds of solid waste not generated > 47,920,000 BTUs of energy not consumed

2006 FINANCIAL HIGHLIGHTS

FISCAL YEARS ENDED SEPTEMBER 30,

OPERATING RESULTS

Operating Revenues Operating Income Net Income Total Energy Deliveries Return on Average Equity*

2006

2005

2004

$3,299,608

$3,148,262

$2,533,607

$146,463

$138,368

$127,218

$78,519

$76,340

$71,574

331.5

379.4

382.7

14.4%

15.3%

15.6%

COMMON STOCK INFORMATION

Earnings per Shareâ&#x20AC;&#x201D;Basic

$2.82

$2.77

$2.60

Annual Dividend Rate at Year-End

$1.44

$1.36

$1.30

Market Price at Year-End

$49.30

$45.98

$41.40

Book Value per Share

$22.50

$15.90

$16.87

Shares Outstanding at Year-End**

27,625

27,546

27,741

Average Shares Outstanding-Basic

27,862

27,591

27,530

57.2

62.6

63.4

7.2

9.7

8.9

38.4

52.4

47.1

102.8

124.7

119.4

471,705

462,856

454,208

$210,003

$209,796

$210,776

228.7

254.7

263.3

$71,027

$39,298

$ 32,165

OPERATING DATA

New Jersey Natural Gas Firm Sales Interruptible Sales Incentive Programs Total New Jersey Natural Gas Energy Deliveries Customers at Year-End Gross Margin NJR Energy Services Wholesale Sales and Gas Under Management Gross Margin * Excluding accumulated other comprehensive income ** Net of treasury shares

Shares outstanding and dollars, except per share data, are in thousands. Sales volumes are in billion cubic feet (Bcf).

FINANCIAL PERFORMANCE

EARNINGS PER SHARE-BASIC $3.00

2.82

RETURN ON EQUITY 16.0%

$1.50

$1.40

15.5%

1.36

15.3

2.60

$2.50

15.9

1.44 15.6

2.77

$2.75

DIVIDENDS PER SHARE

1.30

$1.30

2.41

15.3

15.0%

1.24

$2.25

$1.20

1.20

14.5%

14.4

2.12

$2.00

$1.10

14.0%

$1.75

$1.00

13.5%

2002 2003 2004 2005 2006

TOTAL ENERGY DELIVERIES (Bcf)

PAYOUT RATIO 60%

500

57 51

50%

0 2002 2003 2004 2005 2006

2002 2003 2004 2005 2006

VALUE OF $10,000 INVESTED (9/30/01)* 19,780

$20,000

491

17,882

$18,000

450 422

40%

400

383

$16,000

30%

350

20%

300

$12,000

10%

250

$10,000

332

$14,000

13,171

11,600

0 2002 2003 2004 2005 2006

15,625

379

2002 2003 2004 2005 2006

Forward-Looking Statements — While forward-looking statements about NJR’s expectations made throughout this report are based on information currently available and on reasonable assumptions, actual results could be materially different. Historical results are not necessarily indicative of future earnings. For more information, please refer to NJR reports that are filed periodically with the Securities and Exchange Commission and the section of this document entitled “ForwardLooking Statements.” * Assumes Dividends Reinvested

2 / NEW JERSEY RESOURCES

LETTER FROM THE CHAIRMAN

TO OUR STAKEHOLDERS: Guided by our team of talented employees, we are a lifeline service

worse. From policy and programs to personal actions, there is a

provider dedicated to meeting the needs of our customers, day and

role for each of us. For our children and our future, the time to act

night, no matter what challenges we face. For our customers, that

is now.

means delivering natural gas to heat their homes and run their businesses. For our shareowners, it means providing consistent

As a leader in our industry, one of our roles is to help our customers

results. For the communities we serve, it means being a reliable

use energy wisely. In doing so, we are helping to make a differ-

corporate partner. And for the next generation, it demands that we

ence both economically and environmentally.

act as a responsible steward of our environment. This year, we usher in a new era for our company with the impleOur customers count on us to meet their energy needs and more.

mentation of our “Conserve to Preserve” program. This new approach

They count on us to maintain their quality of life, today, tomorrow and

more directly aligns our customers’ needs and our company’s

for generations to come. Fulfilling that trust is not only our mission;

interests with the clean energy policies of our state. It is designed

it is what New Jersey Resources is all about.

to help our customers conserve energy and preserve our environmental resources, while saving money on their energy bills. At the

OUR WORLD IS CHANGING

same time, our ability to make the substantial capital investments

Simply, subtly, dramatically, our world is changing. We see it all

in our infrastructure necessary to meet our customers’ energy

around us, as we go about our daily lives in our own neighborhoods

needs will not be compromised. This fundamental shift in philos-

and the greater global community. Despite these changes, our focus

ophy represents what is best for our customers, our company

remains on providing the safe, reliable service and consistent per-

and our future.

formance our customers and other stakeholders rely on. ANOTHER YEAR OF STRONG PERFORMANCE

Nowhere are these changes more evident than in our environment.

Fiscal 2006 was another solid year for our company. Our team’s

Recent data continues to show that global warming is real and is

efforts resulted in consolidated earnings of $78.5 million, or $2.82

having an impact on the Earth’s ecosystem, our quality of life and,

per basic share, compared with $74.4 million, or $2.70 per basic

potentially, our future.

share, net of certain one-time items, last year. This performance marked our 15th consecutive year of higher earnings, which we

For a company that provides a lifeline service by keeping people

believe is the longest current streak among all major natural gas

warm in the winter, this is an alarming trend that cannot be ignored.

and electric utilities in the country.

Clearly, the quality of our environment is greatly influenced by the policy decisions made in our state and nation’s capitals, as

As a result of our performance, we were able to increase our div-

well as the actions we take here at home. The issue of global

idend by 5.6 percent, to an annual rate of $1.52 per share, effective

warming will not go away and, left unaddressed, will only get

January 2, 2007.

2006 ANNUAL REPORT / 3

NJR Energy Services, our unregulated wholesale energy services

By using stored supplies procured during the summer months at

company, drove our record financial performance in fiscal 2006.

hedged prices that were relatively low, we were able to avoid having

Capitalizing on opportunities created by higher prices and volatile

to purchase significant additional natural gas supplies at higher

market conditions, we were able to optimize our portfolio of storage

market prices during the height of the winter heating season.

and transportation contracts to achieve a 71 percent increase in earnings over last year. Earnings for the year were $28.1 million,

Our hedging strategy, along with moderate winter temperatures

up from $16.5 million last year.

helped offset some of the impact of higher wholesale prices and gave us the opportunity to implement a bill credit from February

NJR Home Services, which provides unregulated appliance service,

through April, which resulted in savings of approximately $70 for

sales and installation for residential and small commercial customers,

the average customer. We also provided customers with a $22.5

continues to increase productivity, improve performance and main-

million refund in September and put in place a reduction in our Basic

tain high customer satisfaction. In fiscal 2006, NJR Home Services

Gas Supply Service charge, effective October 1, 2006, that lowered

recorded earnings of $1.7 million.

bills by approximately 6.6 percent.

New Jersey Natural Gas, our core business, had lower earnings as

In addition, through efficient management of New Jersey Natural

our customers used less natural gas due to record-high prices and

Gasâ&#x20AC;&#x2122; portfolio of storage and pipeline transportation contracts we

unseasonably warm winter temperatures. Despite these challenges,

were able to save our customers $35 million in natural gas costs.

customer growth and customer satisfaction remained strong. We

Our shareowners realized additional earnings of $4.4 million. These

added 10,159 new customers, with approximately one-third convert-

incentive programs were developed in partnership with the New

ing from other fuels, bringing our total customer count to over 471,000.

Jersey Board of Public Utilities (BPU) and the Department of the

Our overall customer satisfaction rate exceeded 95 percent, which

Public Advocate, Division of Rate Counsel (Rate Counsel), and

is a testament to the dedication and commitment of our employees.

have helped save customers more than $301 million since their inception in 1992.

Weather continued to be a major challenge this winter heating season, with temperatures averaging over 11 percent warmer than

Despite the challenges we faced, our customers continue to recog-

last year. As a result of higher natural gas prices and warmer-

nize and value our commitment to service. J.D. Power and Associates

than-normal weather conditions, we experienced lower customer

rated our company the best among the stateâ&#x20AC;&#x2122;s natural gas utilities,

usage. Customer usage per degree day was 5.6 percent lower than

and first in the east region in the customer service performance

the four-year average.

index, according to its 2006 Gas Utility Residential Customer Satisfaction Survey. Additionally, for the 14th consecutive year we

Using effective hedging practices, we were able to minimize the

have the fewest number of complaints per 1,000 customers with

impact of the sharp spike in commodity costs on our customers.

the BPU among the stateâ&#x20AC;&#x2122;s major electric and natural gas utilities.

4 / NEW JERSEY RESOURCES

Fiscal 2006 was another year of consistent performance for New Jersey Resources.

15th consecutive year of higher earnings.

5.9% increase in our dividend, to an annual rate of $1.44 per share.

N EW J E RSEY R ESOU RCES MANAG E M E NT TEAM

TOP PICTU R E D L- R :

BOTTOM PICTU R E D L- R :

N EW J E RSEY R ESOU RCES

NJ R SE RVICE OFFICE RS

Kathleen T. Ellis Senior Vice President Corporate Affairs

George C. Smith Jr. Vice President Internal Audit

Glenn C. Lockwood Senior Vice President and Chief Financial Officer

Thomas J. Massaro Jr. Vice President Corporate Strategy and Treasurer

President NJR Home Services Rhonda M. Figueroa Corporate Secretary Mariellen Dugan Vice President and General Counsel

Deborah G. Zilai Vice President Corporate Services

Our success is the result of the dedication and commitment of our

contracts and offering new products and services while maintaining

talented team of employees who are the driving force behind every-

its high level of customer satisfaction.

thing we do and all that we achieve. Supported by each other, the women and men of New Jersey Resources are an exceptional group

• Delivering a 16th consecutive year of earnings growth. By main-

of people who are a tribute and an inspiration to us all. They are the

taining a strong financial profile, we are able to access the necessary

heart and soul of our company, there day and night ready to serve

resources to serve our customers and pursue strategies to enhance

our customers. Because of them, we are in the best position possi-

the value of our company. We will continue to do our best to achieve

ble to meet the demands not just for today, but for tomorrow as well.

a long-term earnings growth rate that exceeds our peer group’s average.

A SOUND STRATEGY FOR THE FUTURE

A sound strategy based on consistent performance, quality service,

• Ensuring the health and safety of our employees and the commu-

a stakeholder focus and hard work is at the heart of what we do

nities we serve. Our company has a solid record of employee safety.

and will drive our actions going forward. We will plan to focus our

By providing our employees with the tools and training necessary

efforts in the following areas:

to perform their jobs effectively, including improved employee injury and motor vehicle accident report forms, supervisor safety aware-

• Investing new capital to upgrade our existing infrastructure and expand our customer base. In fiscal 2007, we expect to invest

ness classes and enhanced safety communications, we are helping to ensure that they return home safely at the end of each day.

about $70.5 million in our distribution system to add approximately 9,900 new customers, upgrade our existing infrastructure and

• Working with our regulators to effectively meet the needs of our

meet more stringent federal pipeline integrity guidelines. Over the

customers. We will continue to work with the BPU and Rate Counsel

past 11 years, we have invested nearly $600 million enhancing

to manage price volatility and meet our customers’ energy needs.

our infrastructure.

Their leadership has been critical in our efforts to implement conservation and efficiency-based programs and help customers save

• Growing our wholesale and retail energy services. By utilizing

money and preserve our natural resources. We will also play an

and increasing NJR Energy Services’ portfolio of storage and

active role to support New Jersey’s efforts to develop a compre-

pipeline capacity assets and expanding into new markets, we are

hensive Energy Master Plan.

growing our wholesale energy services business. This growth will be supported by strong risk management and a concentration

• Implementing new strategies for maintaining our performance.

on achieving maximum value from our physical assets. We expect

With the approval of our three-year “Conserve to Preserve” program,

that NJR Energy Services will provide between 25 to 30 percent

we will provide customers with the tools to reduce their energy

of our earnings in the future. NJR Home Services will continue to

costs and safeguard our environmental resources, while addressing

focus on growing its installation business, expanding its service

the implications of lower customer usage.

2006 ANNUAL REPORT / 5

• Strengthening our neighborhoods and serving our communities.

are proud to support initiatives like New Jersey’s Clean Energy

As a responsible corporate citizen, our work in the community helps

Program and the New Jersey CleanPower Choice Program that

to strengthen neighborhoods and revitalize our urban areas. We

encourage the use of renewable energy systems and energy effi-

will continue improving the three former manufactured gas plant

ciency measures. A cleaner environment is a legacy we can give to

properties in our service territory and expand our efforts to enhance

our future generations. It is also the right thing to do.

our communities for future generations to come by supporting education, economic development and the environment.

We are committed to doing our part to bring about positive change for our customers, communities, state and nation. I believe we are

LOOKING AHEAD

making progress every day.

Natural gas is America’s most popular home heating fuel keeping more people warm than all other energy forms combined. At the

Through our participation in the U.S. Environmental Protection

same time, natural gas is now the preferred fuel for electric gener-

Agency’s GasStar Program, we implemented a series of facility

ation. With its growing popularity comes increased demand and an

upgrades and operational improvements that have helped reduce

ever-increasing strain on available supplies.

methane emissions by 49,280 Mcf or the equivalent of removing 3,614 cars from New Jersey’s roadways. We were also one of only

The issue of constrained supply and growing demand will not go

two midsize businesses nationally honored by the U.S. Environmental

away. Our national energy policy needs to forcefully address the

Protection Agency for our environmental commitment and partic-

inconsistent approach of encouraging greater use of natural gas

ipation in the federal WasteWise program.

while limiting access to reserves. And while New Jersey has taken the lead in seeking to encourage the more efficient use of all energy

Through our Volunteers Inspiring Service in Our Neighborhoods

resources, the federal government needs to expand its efforts in

(VISION) program, our employees, retirees and their families

this critical area. The reality is that energy demand will continue to

contributed over 3,000 hours to working with nonprofit organizations

grow, and we will need both diversity in fuel sources and a strong

to provide help and hope where it is needed most. Together with

emphasis on efficiency if we are to meet this challenge in the most

Interfaith Neighbors, we helped 15 area families realize their dream

environmentally and economically responsible way possible.

of home ownership. In partnership with New Jersey Department of Community Affairs, we are working with Interfaith Neighbors to

In New Jersey, our state has developed a well-earned, national

revitalize and strengthen our neighborhoods.

reputation as a leader in promoting clean energy and environmental initiatives. Working in partnership with our regulators at the BPU and

Through our Project Venture Scholarship Program, students who

Rate Counsel, we are committed to providing the highest quality

completed the Project Venture mentoring program are eligible to

service to our customers and doing our part to preserve our natural

receive a scholarship to help them continue their education. We are

resources and provide our children with a greener tomorrow. We

proud to have Rodney Blair of Asbury Park as our inaugural recipient.

6 / NEW JERSEY RESOURCES

71% increase in earnings at NJR Energy Services rising to $28.1 million from $16.5 million the previous year. NJRES’ performance drove NJR’s strong fiscal 2006 results.

4,900 more appliances under contract, 1,100 installations completed and 2,000 customers added to NJRHS, exceeding our overall productivity targets for fiscal 2006.

10,159 new customers added to NJNG’s customer base bringing our total customer count to more than 471,000.

N EW J E RSEY R ESOU RCES MANAG E M E NT TEAM

TOP PICTU R E D L- R :

BOTTOM PICTU R E D L- R :

N EW J E RSEY NATU RAL GAS

NJ R E N E RGY SE RVICES

Kathleen F. Kerr Vice President Marketing and Customer Services

Richard R. Gardner Vice President

Craig A. Lynch Vice President Energy Delivery Linda B. Kellner Chief of Staff New Jersey Resources Mark R. Sperduto Vice President Regulatory Affairs

Ginger P. Richman Vice President Stephen D. Westhoven Vice President Energy Trading Joseph P. Shields Senior Vice President

All around us, we can see how our work touches people’s lives.

PNC Bank Arts Center in Holmdel, New Jersey. I hope you will be

We see it in our schools, our communities, the air we breathe and

able to join us. In the meantime, I welcome your thoughts and com-

our quality of life. From the smile on a customer’s face to the

ments on how we are doing. Please write, call or send an e-mail to

promise of a better tomorrow in a child’s eye, these are among our

lmdownes@njresources.com. As always, your feedback is appreciated.

greatest accomplishments. Our company was founded on vision and commitment. We proudly PARTNERS IN PERFORMANCE

carry on that tradition today. We recognize that our business is

The invaluable contributions of our employees cannot be overes-

about more than natural gas. It is about service, performance and

timated. Without their dedication, none of what we accomplished

leadership. These are the values that drive us forward.

would be possible. These dedicated women and men are the leaders and driving force behind our company. In particular, I would like to rec-

With the confidence you place in us, we will continue to do our

ognize the members of the International Brotherhood of Electrical

best to reward your support with consistent results and a better,

Workers Local 1820, which represents the majority of our employees.

brighter, greener tomorrow.

We are fortunate to have an active and engaged Board of Directors

Thank you for your support,

lending their talents and expertise to our company. Joining the Board this year is Jane M. Kenny. An accomplished leader with a broad understanding of the issues facing our industry, Jane is a welcome addition to our Board. Also, Dorothy K. Light will be retiring

Laurence M. Downes

from the Board this year after nearly two decades, and I would like

Chairman and CEO

to express my gratitude for her invaluable leadership and service

December 1, 2006

to our company. On behalf of all of our employees, I extend a special thank you to our customers for the opportunity to be of service. I would also like to recognize the many community leaders, regulators and policy makers who work in partnership with us to ensure that we are able to provide the best possible service. And, finally, I thank our shareowners for their trust and investment in our company. Our Annual Shareowners Meeting will be held on Wednesday, January 24, 2007, at the Robert B. Meyner Reception Center at the

2006 ANNUAL REPORT / 7

8 / NEW JERSEY RESOURCES

Drastic changes in climate have the potential to decrease the extent and density of New Jerseyâ&#x20AC;&#x2122;s forested areas by as much as 20%. U.S. Environmental Protection Agency

2006 ANNUAL REPORT / 9

CONSERVE TO PRESERVE

OUR COMPANY For more than 50 years, our customers and shareowners have come to count on our company to meet their needs in many different ways.

Whether through the delivery of safe and reliable natural gas service,

At New Jersey Resources, we understood that the time had come

exceptional customer care, support for community organizations

to change the way we do business. We sought and won approval

or our record of consistent financial growth, we view ourselves as

from the New Jersey Board of Public Utilities for use of a mech-

a corporate leader, and we take that role very seriously.

anism that separates our margin from customer usage, enabling us to recover costs and maintain a safe and reliable system, while

This year, the company took on the industry’s most serious challenge

at the same time helping our customers conserve energy, lower

– the ever-rising demand for energy across the nation and its impact

their bills and help to preserve the environment.

on our customers and the environment. This new business strategy brings with it the opportunity to set For New Jersey Natural Gas, as for utilities across the nation, our

an example for our nation in energy conservation and environ-

ability to invest in and grow our business has always been linked to

mental protection. It aligns the interests of our customers and

increasing customer usage, further fueling demand, straining supply

our shareowners with state environmental and energy policy,

and pushing natural gas prices to record levels, with devastating

protecting the company’s financial position while conserving

customer impacts.

precious energy resources and preserving our quality of life for years to come.

10 / NEW JERSEY RESOURCES

2006 ANNUAL REPORT / 11

27 INCHES If immediate action to reduce the effects of global warming is not taken, the sea level along the 127-mile New Jersey shore may increase this much by 2100. U.S. Environmental Protection Agency

12 / NEW JERSEY RESOURCES

Rising sea level and temperatures in New Jersey would likely change the makeup of the stateâ&#x20AC;&#x2122;s ecosystem, which is home to over 550 native wildlife species. National Wildlife Federation

2070 At the current rate of retreat, all the glaciers in Glacier National Park will be gone by this time. World Meteorological Organization

2006 ANNUAL REPORT / 13

14 / NEW JERSEY RESOURCES

CONSERVE TO PRESERVE

OUR CUSTOMERS At New Jersey Resources, we are committed to helping our customers use less natural gas, save money and preserve the environment.

By giving customers the tools they need to make informed decisions,

Equally, if not more, important are the long-term environmental

they can more effectively control their energy consumption today

benefits of improved efficiency and lower energy usage. Through our

and help build a greener tomorrow.

combined efforts to conserve, we can reduce greenhouse gases in the atmosphereâ&#x20AC;&#x201D;the leading cause of global warming. And while

Whether through the use of simple energy conservation kits, or the

there is no simple solution to the problem of global warming, by

investment in the latest high-efficiency equipment, every customer

conserving energy we are surely and substantially contributing to

needs to understand which energy-saving options make the most

the effort.

sense for their home or business. That is the first step to savings. Those who take action will see the immediate benefit of lower

The economic benefits of conservation are immediately apparent

energy bills. And in the long run, reduced usage will help ease the

and quantifiable; future environmental benefits less so. But one

strain on our nationâ&#x20AC;&#x2122;s natural gas supply, potentially driving down

thing is certain: the choices we make today will directly affect

wholesale costs, and further lowering bills.

the health of our planet and the quality of life for our children and grandchildren.

2006 ANNUAL REPORT / 15

16 / NEW JERSEY RESOURCES

Continuing at its current pace, global warming could raise average U.S. temperatures 90 F by the end of the century. National Academy of Sciences

2006 ANNUAL REPORT / 17

CONSERVE TO PRESERVE

OUR FUTURE Though often not immediately seen, over time the effects of global warming have begun to visibly change our world as we know it, causing damage to our environment.

In a worst-case scenario, unless we act now, the beautiful coastline

trapped in the atmosphere, temperatures will continue to rise

that borders much of our service territory will continue to recede

and the distinctions among our four seasons will likely disappear.

and will disappear as polar ice caps melt and sea levels rise around the globe.

Whether or not the worst predictions come to pass, our children should not be asked to accept any negative environmental conse-

And violent storms, such as those that ravaged the Gulf Coast last

quences due to our inaction nor to solve any problems that could

year, will threaten lives and thriving economies more frequently

arise from a legacy of neglect.

and more intensely. While there is no single, simple blueprint for protecting and reclaiming What we do know, without question, is that temperatures this

our environment, by conserving energy we are taking an important

past year equaled the warmest on record and that, unless we

step in the right direction. Through a joint commitment among indi-

change our behavior, it is a record we can expect to fall. And it

viduals, businesses and government, we can slow, and eventually

has been predicted that, as greenhouse gases continue to be

reverse, the effects of global warming that threaten the health of the planet and preserve our quality of life for future generations.

18 / NEW JERSEY RESOURCES

2006 ANNUAL REPORT / 19

NJNG’S SERVICE TERRITORY

MORRIS COUNTY

MIDDLESEX COUNTY MONMOUTH COUNTY

OCEAN COUNTY

NJR’S MARKETS SERVED

20 / NEW JERSEY RESOURCES

OUR CORPORATE PROFILE

NEW JERSEY RESOURCES Is setting the standard for reliability as a leader in the natural gas industry. Our nearly 800 dedicated employees are the driving force behind our commitment to provide reliability, value and comfort to our customers every day. New Jersey Natural Gas, our principal subsidiary, is one of the fastest-growing local distribution companies in the United States. Other operating subsidiaries of the NJR family of companies include NJR Energy Services and NJR Home Services.

NEW JERSEY NATURAL GAS Serves over 471,000 customers in New Jersey’s Monmouth and Ocean counties and parts of Morris and Middlesex counties. Since 1952, customers have counted on us for the natural gas that keeps homes warm and businesses running. Through our service area’s outstanding demographics, New Jersey Natural Gas has maintained an average annual customer growth rate of about 2.5 percent over the past 10 years. We are also a leader in the off-system and capacity-release markets.

NJR ENERGY SERVICES Provides unregulated wholesale energy services to customers in New Jersey, states from the Gulf Coast to New England and Canada. We provide outstanding customer service and expert management of natural gas storage and capacity assets to help customers maintain their competitive edge. Our natural gas supply, pipeline capacity and storage management services include storage positions in the Gulf Coast, Appalachia, Mid-Continent and Canada.

NJR HOME SERVICES Provides expert home appliance service, sales and installations to customers primarily in New Jersey’s Monmouth and Ocean counties and parts of Morris and Middlesex counties. We offer comprehensive appliance service contracts and related products and services, including installing, servicing and repairing natural gas furnaces, hot water heaters, grills, outdoor lights and electric central air conditioning equipment. Our team of skilled, certified technicians offers unparalleled care and service for our customers’ comfort at home.

More information about the New Jersey Resources family of companies is available on our Web site at njliving.com.

2006 ANNUAL REPORT / 21

DIRECTORS AND OFFICERS OF NEW JERSEY RESOURCES

DIRECTORS Nina Aversano, 61 (A,E) President and Chief Executive Officer Aversano Consulting, LLC (1998)

Dorothy K. Light, 69 (B,C,D) Chairman and Chief Executive Officer Alden Enterprises, LLC (1990)

Lawrence R. Codey, 62 (A,B,E) President and Chief Operating Officer (retired) Public Service Electric & Gas Company (2000)

J. Terry Strange, 62 (A,B,C) Vice Chairman (retired) KPMG (2003)

Laurence M. Downes, 49 (B) Chairman of the Board and Chief Executive Officer New Jersey Resources (1995)

David A. Trice, 58 (C,D,E) President and Chief Executive Officer Newfield Exploration Company (2004)

M. William Howard Jr., 60 (C) Pastor Bethany Baptist Church (2005)

William H. Turner, 66 (B,C,D) Dean of the College of Business Stony Brook University (2000)

OFFICERS

Jane M. Kenny, 55 (C) Senior Vice President and Managing Director The Whitman Strategy Group, LLC (2006)

Gary W. Wolf, 68 (A,B,E) Senior Partner (retired) Cahill, Gordon & Reindel (1996)

Alfred C. Koeppe, 60 (A,B,D,E) President and Chief Executive Officer Newark Alliance (2003)

George R. Zoffinger, 58 (D,E) President and Chief Executive Officer New Jersey Sports and Exposition Authority (1996)

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Duncan Thecker, 91 President Duncan Thecker Associates Director Emeritus (1982)

Laurence M. Downes, 49 Chairman of the Board and Chief Executive Officer (1985) Mariellen Dugan, 40 Vice President and General Counsel (2005) Kathleen T. Ellis, 53 Senior Vice President Corporate Affairs (2004) Rhonda M. Figueroa, 47 Corporate Secretary (1981) Linda B. Kellner, 47 Chief of Staff (1995) Glenn C. Lockwood, 45 Senior Vice President and Chief Financial Officer (1988) Date represents year of affiliation with an NJR company.

Date represents year Director joined NJR Board. (A) Member of Audit Committee (B) Member of Executive Committee (C) Member of Financial Policy Committee (D) Member of Leadership Development and Compensation Committee (E) Member of Nominating/ Corporate Governance Committee

DIRECTORS AND OFFICERS OF NEW JERSEY RESOURCES SUBSIDIARIES

NEW JERSEY NATURAL GAS

NJR SERVICE OFFICERS

DIRECTORS

Laurence M. Downes, 49 President and Chief Executive Officer (1985)

Laurence M. Downes, 49 (1995) Lawrence R. Codey, 62 (2000) M. William Howard Jr., 60 (2005) Alfred C. Koeppe, 60 (2003) Gary W. Wolf, 68 (1996) George R. Zoffinger, 58 (1996) Date represents year Director joined NJR Board.

OFFICERS Laurence M. Downes, 49 Chairman of the Board and Chief Executive Officer (1985) Mariellen Dugan, 40 Vice President and General Counsel (2005) Rhonda M. Figueroa, 47 Corporate Secretary (1981) Kathleen F. Kerr, 43 Vice President Marketing and Customer Services (2005) Craig A. Lynch, 45 Vice President Energy Delivery (1984) Thomas J. Massaro Jr., 40 Treasurer (1989) Joseph P. Shields, 49 Senior Vice President Energy Services (1983) Mark R. Sperduto, 48 Vice President Regulatory Affairs (2005)

Mariellen Dugan, 40 Vice President and General Counsel (2005) Rhonda M. Figueroa, 47 Corporate Secretary (1981) Glenn C. Lockwood, 45 Senior Vice President and Chief Financial Officer (1988) Thomas J. Massaro Jr., 40 Vice President Corporate Strategy and Treasurer (1989) George C. Smith Jr., 49 Vice President Internal Audit (1984)

Glenn C. Lockwood, 45 Senior Vice President and Chief Financial Officer (1988) Ginger P. Richman, 42 Vice President (2003) Joseph P. Shields, 49 Senior Vice President (1983) Stephen D. Westhoven, 38 Vice President Energy Trading (1990) NJR HOME SERVICES OFFICERS Mariellen Dugan, 40 Vice President and General Counsel (2005) Glenn C. Lockwood, 45 President (1988) COMMERCIAL REALTY & RESOURCES

Deborah G. Zilai, 53 Vice President Corporate Services (1996) NJR ENERGY SERVICES OFFICERS Laurence M. Downes, 49 President and Chief Executive Officer (1985) Mariellen Dugan, 40 Vice President and General Counsel (2005) Rhonda M. Figueroa, 47 Corporate Secretary (1981) Richard R. Gardner, 43 Vice President (1983)

OFFICERS Laurence M. Downes, 49 Chairman and Chief Executive Officer (1985) Mariellen Dugan, 40 Vice President and General Counsel (2005) Rhonda M. Figueroa, 47 Corporate Secretary (1981) John Lishak Jr., 66 President (1981) Glenn C. Lockwood, 45 Senior Vice President and Chief Financial Officer (1988) Date represents year of affiliation with an NJR company.

2006 ANNUAL REPORT / 23

PRESENTING OUR 2006 FORM 10-K

Our 2006 Form 10-K includes financial statements for NJR. It also includes detailed information about each of our subsidiaries and the competitive environments of our businesses, properties we own and other matters. All publicly held companies in the United States are required to file a Form 10-K report with the Securities and Exchange Commission (SEC) every year. Our Form 10-K is required by the rules and regulations of the SEC to contain information in addition to the financial information included in our previous annual reports to shareowners. We are supplying our 2006 Form 10-K (without exhibits) consistent with our commitment to provide transparency and full disclosure to our shareowners. The 2006 Form 10-K is amended, supplemented and updated by any amendment that we may file, and by all of the quarterly reports on Form 10-Q and recent reports on Form 8-K we file with the SEC during the year. We urge you to read all such reports. Copies may be obtained as described under Request for Documents on the inside back cover of this Annual Report.

FORM 10-K OVERVIEW This Annual Report is not a part of, and should not be considered to be included in, our 2006 Form 10-K. Use the listing below, which includes highlights of the 2006 Form 10-K, to help you find information easily. A comprehensive Table of Contents with the page number for each item can be found on page “i.” PART I: A DESCRIPTION OF NJR BUSINESSES INCLUDES: • Detailed descriptions of NJR subsidiaries • The regulatory outlook for the utility business • Risk factors related to our business • Description of properties owned and operated by NJR

• Reports of independent auditors • Supplementary financial information (unaudited) • Management’s reports on financial control over financial reporting and disclosure controls and procedures PART III: INFORMATION ABOUT BOARD MEMBERS, EXECUTIVE OFFICERS AND AUDITORS • Information about members of the Board of Directors, executive compensation and accounting fees is incorporated by reference to NJR’s proxy statement

• Legal proceedings PART II: MANAGEMENT’S DISCUSSION OF RESULTS AND FINANCIAL STATEMENTS Items 5 and 6 include: • Quarterly dividend and stock price information • Selected financial data for NJR • Operational statistics for NJNG Items 7 and 7a include: • Management’s Discussion and Analysis of Financial Condition and Results of Operations, which provides a discussion of changes in earnings and cash flows over the past three years • Quantitative and Qualitative Disclosures About Market Risk

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Items 8 and 9 include: • Financial statements and footnotes for NJR

PART IV: EXHIBITS AND SIGNATURES INCLUDE: • An index of exhibits • Signatures of members of the Board of Directors and certain officers

2006 FORM 10-K

SHAREOWNER INFORMATION

PHOTOGRAPHY: DESIGN:

Safe, Reliable and Competitively Priced Service Customer Satisfaction Growth Quality Valuing Employees Corporate Citizenship Superior Return

Decker Design, Inc., New York

WE ARE COMMITTED TO ENHANCING OUR CUSTOMERS’ QUALITY OF LIFE BY MEETING THEIR EXPECTATIONS FOR RELIABILITY AND VALUE IN AN ENVIRONMENTALLY RESPONSIBLE WAY, EVERY DAY.

John Madere

Information in this Annual Report should not be considered a solicitation of the sale or purchase of securities.

Details are contained in the Plan prospectus, which may be obtained from the Agent or the Company.

This Annual Report is printed on paper manufactured with wind-generated energy. It is also manufactured with 30 percent post-consumer waste fiber.

TABLE OF CONTE NTS

1 2 3 6 20 21 22 24 25 ibc

Savings derived from using post-consumer recycled fiber:

In memory of James J. Young for his 40 years of dedicated service and many contributions as a valued employee of New Jersey Natural Gas and President of Local 1820, IBEW.

> 66 trees not cut down > 191 pounds water-borne waste not created > 28,137 gallons of wastewater not generated > 3,113 pounds of solid waste not generated > 47,920,000 BTUs of energy not consumed

N EW J ERSEY RESOU RCES 2006 AN N UAL R EPORT

CONSERVE TO PRESERVE

NEW JERSEY RESOURCES 2006 ANNUAL REPORT

1415 Wyckoff Road Post Office Box 1468 Wall, NJ 07719 732-938-1480 njliving.com