Construction on Chicago-based Commonwealth Edison's new electrical grid system is scheduled to begin in January.
The announcement comes about one week after Illinois Gov. Pat Quinn signed controversial legislation allowing electric companies to raise rates to pay for a so-called digital "smart grid."
ComEd said the $2.6 billion project could create more than 1,000 permanent jobs in the Chicago area over the next five years.
Mayor Rahm Emanuel said on Wednesday the upgrade is an essential investment for the city.
"We are preparing our economy of tomorrow with jobs today, and it allows us to also make the types of investments that are necessary to propel our economy with the jobs and the industries of tomorrow," said Emanuel.
ComEd estimated the grid updates will cost each customer about $3 extra per month. The company defended the increases on Wednesday as necessary to pay for needed updates to its power grid.