Mass electrification of the residential and commercial heating sector using heat pumps and thermal energy storage is a crucial step towards the development and operation of smart grids. An aggregation of heat pumps can provide an alternate source of frequency regulation by generating flexibility on the demand side as opposed to inefficient natural gas generators that are a source of supply side flexibility. This in turn can facilitate greater incorporation of power generated from clean but intermittent sources of energy such as wind and solar. To this end, a hierarchical control scheme is introduced that will enable an aggregator to tap into the inherent flexibility associated with a portfolio of variable speed heat pump/thermal storage subsystems. This work concentrates on the development of a model based predictive controller operating on the subsystem level and its integration into the global control architecture. Additionally, the value of formulating the performance cost optimization function and the system dynamics equation as a mixed integer program is explored. The aforementioned formulation facilitates the use of simplified, yet comprehensive, dynamic heat pump performance models and at the same time addresses the problem of heat pump operation in the compressor dead-band range. The simulations also highlight the power-tracking functionality of the developed controller when it is integrated with higher level controllers in the hierarchical control scheme. Index Terns: Variable Speed Heat Pump, Thermal Energy Storage, Frequency Regulation, Economic Model Predictive Control, Mixed Integer Programming