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B.C. Hydro saw $279 million in expected profits from the California electricity market evaporate Thursday after a U.S. federal judge ruled the state was overcharged $2.7 billion by energy companies during its power crisis.

In a long-awaited ruling, Judge Bruce Birchman at the U.S. Federal Energy Regulatory Committee found that Hydro's Powerex subsidiary and dozens of other energy traders, including Duke, Williams and Enron, must return windfall profits that came during manipulation of the unstable California market during 2000 and 2001.

Investigations of market manipulation are still under way, and there was no suggestion in Birchman's judgment that Powerex acted inappropriately.

But after a detailed study of electricity prices that would have been charged in California without manipulation by companies such as Enron, Birchman decided that refunds were due.

The state of California -- which bungled its plan to deregulate the state electricity market and left itself vulnerable -- claims it's owed $13 billion in overcharges, but Birchman decided the state is due substantially less.

B.C. Hydro won't actually have to write the state a cheque because the refund will take the form of a reduction in the amount of money it is still owed.

Hydro's most recent annual report states that the Crown corporation was owed $442 million from California.

As a result of Birchman's decision, the amount due Hydro from California electrical system operators will be reduced to $163 million.

It's not clear if California will make good on its remaining debt to Hydro any time soon -- the state is still pursuing the matter through the courts and U.S. grand jury investigations into market manipulation continue.

As well, Birchman's report must be adopted by a Federal Energy Regulatory Committee panel, which will formally consider it early next year.

Hydro spokesperson Elisha Odowichuk said the corporation is still studying Birchman's decision.

"Before FERC makes its ruling, Powerex and other market participants have an opportunity to comment on the findings," she said. She added that Hydro will abide by FERC's decision.

Odowichuk said Birchman's judgment conforms to a 2001 FERC order for refunds and to Powerex's calculations of the financial cost of that order.

The 2001 order found that, rather than general wrongdoing, unique circumstances and poor energy market design created the crisis -- and necessitated refunds.

Although electricity can trade on the U.S. market for as little as $5 Cdn per megawatt hour during periods of high supply and low demand, wholesale prices averaged $500 per megawatt hour during the crisis and occasionally reached prices more than 10 times that amount.

Since B.C. Hydro has already written off most of the money it is owed from California, any money received in the future will be applied as new revenue.