Brussels (Platts)--12Nov2012/751 am EST/1251 GMT

EU countries are being too slow in implementing the reforms needed to achieve EU leaders' goal to have an internal energy market by 2014, according to a draft of the European Commission's imminent internal energy market review seen by Platts Monday.

"Today the EU is not on track to meet this deadline," the draft review says.

EU leaders last month reiterated their commitment to complete the EU's elusive internal energy market by 2014, but the EC's draft says that governments are failing to follow through on this.

"Not only are member states slow in adjusting their national legislation and creating fully competitive markets with consumers' involvement, they also need to move away from, and resist the calls for, inward-looking or nationally inspired policies," the draft says.

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The draft picks out national capacity payment mechanisms for electricity generation as a key potential threat to the internal market. EU countries such as the UK are considering such mechanisms in order to ensure long-term security of electricity supply.

"The Commission is of the view that if capacity mechanisms are not well designed and/or are introduced prematurely or without proper coordination at EU level, they risk being counterproductive," the draft says.

"Poorly designed capacity mechanisms will tend to distort investment signals," and could hamper cross-border trade and competition by closing off national markets, the draft adds.

The draft urges EU governments to examine alternatives such as peak-shaving measures, increased imports and demand-side response from retail as well as industrial customers.

It also urges governments to "seek cross-border solutions to any problems they find before planning to intervene. Any capacity mechanism needs to take into account any impact the intervention will have on neighboring member states and on the internal energy market."

The draft says the EC plans to hold a public consultation on electricity security of supply, generation adequacy and the internal energy market, and that it may propose follow-up measures.

The EC is due to present its formal review on November 15. The deadline for implementing the EU's latest internal energy market reforms, known as the third package, was March 3, 2011.

--Siobhan Hall, siobhan_hall@platts.com
--Edited by Alisdair Bowles, alisdair_bowles@platts.com

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