Pepco, which has served the area for the last century, will be sold to Chicago-based Exelon.
Exelon is buying Pepco Holdings Inc. for $6.83 billion to create a large electric and gas utility in the Mid-Atlantic region.
Exelon will pay $27.25 per Pepco share, an 18 percent premium to the company's $23.10 closing price on Tuesday.
The deal will combine Exelon Corp.'s electric and gas utilities BGE, ComEd and PECO with Pepco's Atlantic City Electric, Delmarva Power and its namesake utility.
The combined utility businesses will serve approximately 10 million customers and have a rate base of approximately $26 billion.
Pepco's CEO Joseph Rigby said that being part of a family of large urban utilities will be an "enormous value" to Pepco customers during major storms.
"The billing process, the names of the company will stay the same, the union contracts will be honored, there will be no job impact at the operating utility," Rigby said. "There will be some employee impact. It'll also be at the executive level."
Exelon President and CEO Chris Crane will serve in those roles for the combined company.
Both companies' boards unanimously approved the transaction, which is targeted to close in 2015's second or third quarter. The deal needs approval from Pepco shareholders as well as regulatory approvals.