<PAGE>   1
                        Aquila Gas Pipeline Corporation


                              File Number 1-12426


                                 Exhibit 10.26




      Agency Agreement Relating to Certain Marketing and Trading Services
      between Aquila Energy Marketing Corporation and Aquila Gas Pipeline
                               Corporation, et al


<PAGE>   2

                      AGENCY AGREEMENT RELATING TO CERTAIN
                         MARKETING AND TRADING SERVICES

                BETWEEN AQUILA ENERGY MARKETING CORPORATION AND
                     AQUILA GAS PIPELINE CORPORATION, ET AL

This Agreement is entered into as of January 1, 1999, between Aquila Energy
Marketing Corporation, a Delaware corporation (AEM), and Aquila Gas Pipeline
Corporation, a Delaware corporation (AQP), and its wholly owned subsidiaries,
including but not limited to Aquila Southwest Pipeline Corporation, Aquila
Southwest Marketing, L. P., and Tristar Gas Company, L. P. (AQP and its
subsidiaries shall be referred to collectively as Aquila Southwest).


The parties agree as follows:

1.   From and after the date of this Agreement, AEM will have the exclusive
     right and obligation to market, sell and trade all natural gas owned,
     controlled or purchased by Aquila Southwest, and Aquila Southwest hereby
     appoints AEM as its exclusive agent for such purposes. Aquila Southwest
     shall compensate AEM for the direct and indirect costs, including employee
     incentive amounts, incurred by AEM related to this service. Such costs
     shall be charged pursuant to the Agreement Relating to Services and Other
     Matters entered into between Aquila Energy Corporation and Aquila Gas
     Pipeline Corporation as of August 1, 1993.

2.   It is understood that, for purposes of tracking the services provided to
     Aquila Southwest hereunder, AEM will establish a portfolio of business
     that will be identified internally to AEM as "AEM Texas." AEM Texas will
     replicate the scope of trading and marketing activities currently done by
     Aquila Southwest. It is the intent of the parties that all AEM Texas
     trading and marketing activities will be performed by an AEM staff that is
     physically located in office space provided by AQP.

3.   As part of the effectuation of this Agreement, personnel currently
     employed in the marketing, sales and trading functions within Aquila
     Southwest may be offered employment with AEM. AEM may but is not obligated
     to hire these employees. This Agreement shall not create any third party
     beneficiary rights by any past, current or future employees of Aquila
     Southwest.

4.   As agent for Aquila Southwest, AEM shall sell all of Aquila Southwest's
     natural gas according to an existing agreement between Aquila Southwest
     Marketing, L. P., and Aquila Southwest Pipeline Corporation, dated March
     1, 1985, as amended (Transfer Agreement). Aquila Southwest agrees the
     Transfer Agreement shall not be modified during the term of this Agreement
     without the consent of AEM.

5.   If necessary in order to effectuate this Agreement, all of Aquila
     Southwest's inter- and intrastate transportation, storage and related
     agreements shall be assigned to AEM, or AEM shall be designated as agent
     to act for Aquila Southwest. Revenues and costs related to the use of
     these agreements shall be part of AEM Texas.

6.   Aquila Southwest shall be provided speculative trading limits measured by
     Value at Risk in accordance to AEM's trading policy. Aquila Southwest
     shall be given access to RiskWorks reports that are limited to the
     positions and profit and loss of the AEM Texas portfolio. AEM will meet on
     an as needed basis with senior management of AQP to discuss issues
     relative to the performance and strategic direction of AEM's marketing and
     trading efforts as they relate to this Agreement.

7.   Aquila Southwest and AEM shall each have full rights to audit the books
     and records of AEM Texas in order to verify the Weighted Average System
     Price (WASP) and Gross Margin to meet Aquila Southwest's obligations under
     its gas purchase contracts and to insure compliance with Paragraphs 1 and
     2 of this Agreement. In addition, Aquila Southwest shall have the right
     upon written request to have AEM furnish all documents relative to the
     WASP as necessary to satisfy Aquila Southwest's supplier audit needs.

8.   This Agreement shall continue for a period of two (2) years (Initial
     Term), and shall continue thereafter on a year-to-year basis (Extended
     Term). Either party may terminate this Agreement by giving the other six
     (6) months' notice prior to the end of the Initial Term or any Extended
     Term. If Aquila Energy Corporation or any of its affiliates should cease
     to own at least fifty (50) percent of the outstanding shares of AQP,
     either party shall have the right to terminate this Agreement on sixty
     (60) days' notice, effective on or after the date when such ownership
     falls below fifty (50) percent. Upon receipt of such notice of
     cancellation, the parties shall meet and determine an appropriate
     transition plan to return responsibility for sales and transaction
     management back to Aquila Southwest. Upon termination, all rights and
     obligations contained within AEM Texas shall be assumed by Aquila
     Southwest.



<PAGE>   3

9.   Any notices required under this Agreement shall be in writing and shall be
     valid when postmarked or sent via facsimile as follows:

To AEM:
[Monthly volume/pricing communications]
Aquila Energy Marketing Corporation
Attention:  Buck Guinn
100 N. E. Loop 410, Suite 1000
San Antonio, TX 78216
Facsimile No. 210-476-1290

[Other notices]
Aquila Energy Marketing Corporation
Attention:  Contracts Department
2533 N. 117 Avenue
Omaha, NE  68164
Facsimile No. 402-498-4543

To Aquila Southwest:
Aquila Gas Pipeline Corporation
Attention:  Joe Becraft
100 N. E. Loop 410, Suite 1000
San Antonio, TX 78216
Facsimile No. 210-375-0322

Signed as of the date first written above.

Aquila Energy Marketing Corporation       Aquila Gas Pipeline Corporation,
                                          Aquila Southwest Pipeline Corporation,
                                          Aquila Southwest Marketing, L. P., and
                                          Tristar Gas Company, L. P.

By: /s/ Ed K. Mills                       By: /s/ Joe Becraft
    -------------------------                 ------------------------
Name: Ed K. Mills                         Name: Joe Becraft
Title: President & COO                    Title: President