Philadelphia agreed on Monday to sell its natural gas utility to the UIL Holdings Corporation, a publicly traded power company, for about $1.9 billion, in a deal that would put the country’s biggest city-owned gas works in private hands.

Under the terms of the deal, UIL will maintain its current base rates until 2017. After that, any changes must be approved by Pennsylvania’s Public Utility Commission.

The 178-year-old utility manages about 6,000 miles of gas mains and pipes for 500,000 customers in Philadelphia.

If the deal is approved by the Philadelphia City Council and the state utility commission, it will bolster UIL’s existing businesses, expanding its customer base to more than 1.2 million gas and electricity customers across three states.

UIL already operates in Connecticut and Massachusetts through subsidiaries like the United Illuminating Company and Berkshire Gas.

The company, which traces its history back to 1899, said the deal – the biggest in its history – will begin immediately adding to its operating and free cash flow.

“PGW Operations is an excellent operational and strategic fit for our company and a natural addition to our portfolio of fully regulated utilities,” James P. Torgerson, the chief executive of UIL Holdings, said in a statement. “We are committed to investing in PGW Operations to enhance its ability to deliver cost efficient, safe and reliable natural gas and high quality service to customers.”

UIL has lined up $1.9 billion in loans from Morgan Stanley to support the deal, and plans to issue new debt and stock to help finance the deal while keeping an investment-grade credit rating.

UIL was advised by Tudor, Pickering, Holt & Company, Morgan Stanley and the law firm Sullivan & Cromwell. The city was advised by Lazard.