The Government has been threatened by Brussels with daily £250,000 fines for failing to comply with EU single market rules on energy laws.
The European Commission said it was pursuing legal action because the Government had, firstly, failed to honour an EU leaders' agreement in February 2011 to transpose EU electricity and gas directives into UK law and, secondly, ignored subsequent warnings.
A Government spokesman said the Commission's action was "regrettable" because the UK had done "significant work" to implement the rules, which will be completed by April this year.
David Cameron said Britain was "at the heart" of the policy in his landmark speech on the country's European future.
To the surprise of many Lib Dems, Nick Clegg appears to have played down the importance of the Coalition's divide on an in-out referendum.
Business leaders in Davos are worried about the Prime Minister's pledge to put Britain's membership of the European Union to a referendum.
With some in France keen to "roll out the red carpet" for a British exit, Germans favouring decentralisation welcome EU renegotiation talks.