During power grid contingencies, frequency regulation is a primary concern. Historically, frequency regulation during contingency events has been the sole responsibility of the power utility. We present a practical method of using distributed demand response scheduling to provide frequency regulation during contingency events. This paper discusses the implementation of a control system model for the use of distributed energy storage systems such as battery banks and electric water heaters as a source of ancillary services. We present an algorithm which handles the optimization of demand response scheduling for normal operation and during contingency events. We use dynamic programming as an optimization tool. A price signal is developed using optimal power flow calculations to determine the locational marginal price of electricity, while sensor data for water usage is also collected. Using these inputs to dynamic programming, the optimal control signals are given as output. We assume a market model in which distributed demand response resources are sold as a commodity on the open market and profits from demand response aggregators as brokers of distributed demand response resources can be calculated. In considering control decisions for regulation of transient changes in frequency, we focus on IEEE standard 1547 in order to prevent the safety shut-off of inverter-based generation and further exacerbation of frequency droop. This method is applied to IEEE case 118 as a demonstration of the method in practice. (C) 2016 Elsevier Ltd. All rights reserved.