Electricity markets in Texas dodged a big bullet thanks to a U.S. Appeals Court ruling that struck down the EPA’s Cross-State Air Pollution Rule (CSAPR) or Transport rule.

The court found CASPR goes beyond the authority granted to the EPA under the Clean Air Act and requires states to extensively reduce their emissions beyond their significant contributions to downwind states. Secondly, the court found the regulation sidestepped states’ authority to implement reductions as specified in the law. Instead, EPA moved forward with Federal Implementation Rules without first giving states a chance to comply with the new emission reductions.

What does that mean for Texas’ electricity market? It means Texas can delay the closure of dozens of coal-fired generation plants to achieve the CSAPR’s stringent standards. An estimated 3,000 megawatts of electricity were expected to be idled during off-peak months due to the Transport rule, negatively impacting the electricity market by jeopardizing reliability and ultimately raising electricity prices.

The chief executive of the Electric Reliability Council of Texas (ERCOT) noted CSAPR “had potentially far-reaching reliability impacts for a grid in which electric use is growing far more rapidly than new generation resources are being built to serve that need.”

But Texas isn’t out of the woods yet. It will most likely be included in the EPA’s replacement rule, though the revised emission standards are expected to be significantly reduced as instructed in the ruling.

In addition, by the time the EPA revises the rule, which could take at least two years, it would have limited impact because four more EPA rules will kick in by 2015, including regulations on mercury emissions, coal combustion and industrial warm water discharges.

The CSPAR decision isn’t the only good news for the Texas electricity market. A week before the ruling a different court vacated EPA’s disapproval of Texas’s Flexible Permit Program for emissions at oil refineries.

With these decisions, the courts have allowed Texas to continue to meet the state’s growing electric demand without passing on high regulatory costs or worse, sacrificing reliability.