This paper presents a novel approach in addressing a critical power system issue i.e. Automatic Generation Control (AGC) in smart grid scenario. It proposes the design and implementation of an optimized fuzzy logic controller (FLC) for AGC of interconnected power network. There are three different sources of power generation considered in two area interconnected model of power system. First area is equipped with single reheat thermal unit and a superconducting magnetic energy storage (SMES) unit while another has hydro unit with SMES. A multi stage ant colony optimization for optimal solution of fuzzy logic controller for tie-line and frequency oscillation suppression is proposed. The optimization of FLC is carried out four different stages. The first stage is optimization of range of input and output variables; second of membership function; third and fourth steps for rule base and rule's weight optimization respectively. Another control approach also used and compared with multi-stage ACO is Genetic algorithm (GA) optimized PID controller to stabilize Ptie-line and Δf oscillations. A comprehensive analysis of traditional techniques and proposed techniques are presented on the basis of major dynamic performance parameters i.e. settling time and peak overshoot.