The Commission's regulatory framework sets out behavioral standards and minimum requirements that licensees must meet in the provision of essential services to its customers. This may include obligations to use best endeavours to meet consumer protection requirements or service standards.
‘Best endeavours means to act in good faith
and using all reasonable efforts, skill and resources.'
The regulatory expectation is that licensees will use their best endeavours, at all times, to meet the consumer protection requirements or service standards (including targets) set by the Commission that require the use of best endeavours. While the best endeavours obligation does not require effort that goes beyond the bounds of reason, it involves considerably more than casual and intermittent activities, including acting honestly, reasonably and making a positive effort to perform the relevant obligation.
The following are examples of best endeavours obligations:
- 'A retailer must use its best endeavours to minimise interruptions or limitations to supply and to restore supply as soon as practicable following an interruption or limitation to supply.'
- 'The distributor must use its best endeavours to achieve … minimum network reliability standards during each and every regulatory year.'
The best endeavours test provides discretion in determining whether the service standard has been achieved. The alternative to setting best endeavours service standard would be to set an absolute service standard. Where an absolute service standard is set and a target is not met, it would be an automatic breach of licence (and governing Act). To date, the Commission has not set absolute service standards as the compliance costs to achieve an absolute standard may not be in the long-term interest of consumers.
Best endeavours service standards
Some licensees, such as SA Power Networks and SA Water, are required to use their best endeavours to meet service standards by aiming to achieve set performance targets. Targets within the standards are generally based on average historical performance and seek to provide a framework that facilitates the continuity of performance outcomes for customers.
Inherent in the notion of average service standards is the recognition that, at times, licensees may not meet a target. This does not give rise to an automatic breach of the best endeavours service standard. Provided a licensee continues to act in good faith and use all reasonable efforts, skill and resources, to meet the service standard target – that is, it can evidence that it has employed its best endeavours - the service standard would be met.
Setting service standard targets based on average performance acknowledges that:
- performance may be above or below the target in a particular quarter or year, and
- performance may be above or below the target for individual service standard events (for example, where travel is required to restore services).
These performance outcomes and variances are expected. Provided the licensee has used its best endeavours to meet the service standard target, the average service standard is considered met.
Assessing best endeavours
A best endeavours requirement is an ongoing obligation to use best endeavours to achieve the consumer protection requirements or applicable service standards. The Commission expects licensees to be using their best endeavours, at all times, in planning for, managing and responding to compliance requirements and service standard events - this is the fundamental principle of a best endeavours obligation or standard.
In doing so, licensees should be able to demonstrate to all stakeholders that they are meeting their regulatory obligations through having effective culture, systems, processes and controls. Licensees should have an effective compliance system that enables them to verify that it is meeting their regulatory obligations at all times – based on Australian Standard on Compliance Programs AS 3806-2006 (as amended from time to time) or on another credible compliance standard (as approved by the Commission in writing on application by the licensee).
Where information indicates a systemic decline in performance, the Commission may request further information from a licensee. This is generally by exception, where a potential issue is identified. For example, this may be where a large underperformance is observed in a single year, a moderate underperformance over a few years or a small underperformance over many years.
When this occurs, the Commission seeks detailed information on the causal factors contributing to the underperformance and the systems, strategies and processes put in place to remediate deficiencies and improve consumer outcomes.
In considering whether a licensee has used its ‘best endeavours’ to meet a service standard, the Commission has regard to the ‘enforcement criteria - matters for consideration’ specified in Chapter 5 of its Enforcement Policy.