It is of prime importance to realize the integration of variable renewable energy sources (VRE) for sustainable energy society. The frequency regulation becomes an important issue in the power system with more VRE integration due to uncertain output fluctuation of VRE generators. Another issue caused by VRE integration is congestion management in transmission network, and locational marginal price (LMP) has been applied in some power networks to avoid the congestion issue based on economic mechanism. The congestion issue has to be considered in the balancing control to cope with frequency fluctuation because more balancing power could be needed due to the VRE integration. Hence, in this paper, the application of LMP to the balancing power market in terms of capacity procurement was proposed. A part of transmission capacity was assigned to the balancing control and the location of the control reserves was given with LMP. The effectiveness of the proposed method was verified through numerical simulations based on a combined model for both the frequency regulation and the power flow calculation. It was shown that the congestion issue was properly mitigated with keeping the frequency fluctuation by using the proposed method.