The European Commission has referred Ireland to Europe's highest court for failing to comply with EU laws ensuring competition and fair distribution of energy supplies, and is demanding a daily penalty of more than €20,000.
On 19 September 2007, the European Commission presented its 'third package' of proposals to further liberalise the EU's energy market (see LinksDossier).
The proposals sparked much controversy, particularly over the issue of 'ownership unbundling' - meaning the break-up of large vertically-integrated energy firms like EDF and E.ON, which simultaneously control electricity production and distribution assets.
France, Germany and six other member states led resistance to the unbundling plans. Together, they tabled an alternative proposal in February 2008, which they argued would guarantee a similar result without forcing energy firms to split their energy production and transmission businesses.
Energy ministers finally clinched a deal in November 2008, agreeing that energy producers from countries which are not fully open to competition would be forbidden to buy up the transmission businesses of energy companies in European countries where full unbundling has been introduced.
The measure was directed at France, which had been opposed to unbundling, while EDF, the state-owned energy firm, went on a shopping spree across Europe.
The EU executive has set a deadline of this year to complete the regulatory framework for the single European energy market and is taking action against member states that have failed to implement existing legislation.
Ireland should have put the bloc's laws - including requirements to ensure those who own transmission networks do not also own the energy they carry - onto its statute books by March 2011, the Commission said a statement.
Ireland's Department of Energy said it expected to have most of the technical provisions of the law in place "as early as possible in 2014", but it was awaiting details from the commission about what measures need to be taken on unbundling.
"In relation to the unbundling aspect, Ireland awaits receipt of the specific detail of the case in the notice of application to the court, and will consider its position when its legal examination of these issues is completed," it said in a statement.
If approved by the Court of Justice in Luxembourg, the fine - imposed because of the "duration and gravity of the infringement" - would apply from the date the court delivers its judgment until Ireland fully complied with the EU law.
"The internal market is vital to tackle Europe's energy and climate challenges and to ensure affordable and secure energy supplies to households and businesses," EU Energy Commissioner Günther Oettinger said.
"Delays in implementation of the EU internal energy market rules have negative effects on all market participants and are therefore not acceptable."