In August, the Public Service Commission (PSC) of the District of Columbia had rejected the proposed acquisition citing that it does not serve public interest.
However, the firms agreed on a new settlement package which is intended to address the concerns raised by the District of Columbia PSC.
Exelon president and CEO Chris Crane said: "Our settlement includes more than 120 commitments to ensure the merger is unequivocally in the public interest."
As part of the new proposal, Exelon will increase investment to $72.8m in Columbia for bill credits, low-income assistance, renewable energy and energy efficiency programs. The investment is also intended to offset distribution rate increases through March 2019 for residential customers.
Pepco and Exelon will also invest $3.5m for new renewable energy and $3.5m for energy efficiency programs in the District of Columbia.
Exelon will also develop up to 10MW of new solar generation and offer $5m to governmental entities to develop renewable energy in addition to purchasing 100MW of wind energy.
Additionally, Pepco will develop at least four new microgrids projects in partnership with the District.
District of Columbia Mayor Muriel Bowser said: "My team negotiated a deal that puts District residents and ratepayers first – by delivering a public utility that is cost-effective, dependable and environmentally sound."
