In power systems the system frequency is a good indicator of the networks resilience to major disturbances. In many deregulated markets, e.g. the Nordic power market, the system operator controls the system frequency manually by calling off bids handed in to a market, called the balancing power market.

In this paper we consider the problem of optimal bid call-off on the balancing market, that the system operator is faced with each operating period. We formulate the problem as a stochastic optimal control problem of impulse type.

When searching for numerical solutions a complicating factor is the structure of the balancing power market, where the overall marginal price applies to all bids. To retain numerical tractability we propose computationally efficient upper and lower bounds for the value function in the dynamic programming algorithm.