EXHIBIT 10.5

  Rosemary Quinn Assistant Vice President
Group General Counsel
Telephone: (410) 205-6342 Facsimile: (410) 205-6448
rosemary.quinn@stpaul.com

July 16, 2004

Keith Stamm
Senior Vice President and Chief Operating Officer
Aquila, Inc.
20 W. 9th Street
Kansas City, MO 64105

   Re: Reimbursement Agreement dated September 13, 2002 between Aquila Energy
Marketing Corporation and St.Paul Fire and Marine Insurance Company

Dear Mr. Stamm:

This letters confirms our understanding and agreement concerning termination of
the payment obligations of Aquila Energy Marketing Corporation (“Aquila”) under
the agreement referenced above (the “Reimbursement Agreement”). Aquila entered
into the Reimbursement Agreement in order to confirm its intentions to reimburse
St. Paul Fire and Marine Insurance Company (“St. Paul”) for costs incurred by
St. Paul as a result of National Indemnity Company (“NICO”) becoming the
co-surety on Advance Payment Surety Bond number 400JS9376 issued to the
Municipal Gas Authority of Mississippi as obligee and Advanced Payment Surety
Bond number 400JY1330 issued to American Public Energy Agency as obligee (each
individually being a “Surety Bond” and, collectively, the “Surety Bonds”). Those
costs include an annual fee due on or about September 13th of each year and a
monthly fee representing the lost investment income on amounts that St. Paul is
required by NICO to maintain in a collateral account with Berkshire Hathaway
Inc. (“Berkshire”). It is St. Paul’s intention to release Aquila from these
payment obligations when St. Paul’s corresponding obligations to NICO are
released.

The parties agree that in the event of termination or cancellation of any one or
both of the Surety Bonds, St. Paul shall promptly notify NICO and Berkshire and
provide any documentation required under the co-surety arrangement with NICO. In
addition, St. Paul shall request that Berkshire return the collateral concerning
such terminated Surety Bond. The parties also agree that in such event they will
cooperate in order to obtain the required written documentation from the
American Public Energy Agency or the Municipal Gas Authority of Mississippi,
whichever is applicable. Upon receipt of such written documentation, St Paul
agrees that it will use its best efforts so that the collateral supporting such
Surety Bond is returned to St Paul within five business days from the date of
St. Paul’s request. Upon receipt by St. Paul of the collateral concerning the
Surety Bond that has been terminated, Aquila shall be released from any future
payment obligations under paragraph 2 (b) or paragraph 3(b) of the Reimbursement
Agreement, whichever is applicable. Because the annual fee that St. Paul owes
NICO for each Surety Bond is non-refundable, St. Paul shall not refund Aquila
any portion of an annual fee previously paid under paragraphs 2(a) and 3(a) of
the Reimbursement Agreement. However, if either or both of the Surety Bonds are
terminated or cancelled on or before September 11th of any given year, Aquila
shall be released from its obligation to pay any future annual fees for such
terminated Surety Bond. St. Paul agrees to keep Aquila informed of its
communications with NICO and Berkshire with respect to the subject matter of
this Reimbursement Agreement.

Please feel free to contact me if you have any questions.

Sincerely,

ST.     PAUL FIRE AND MARINE INSURANCE COMPANY

By:   /s/ Rosemary Quinn     Rosemary Quinn     Assistant Vice President        
Date: July 16, 2004  

ACCEPTED AND AGREED:

AQUILA, INC.

By:   /s/ Keith G. Stamm     Keith G. Stamm     Senior Vice President and    
Chief Operating Officer    
Date: July 16, 2004