This paper provides an efficient method based on the fuzzy PID control scheme for the automatic generation control (AGC) of a three-area system. The model of hydel-thermal power system is established with the equations of dynamic behavior of the system. Control scheme is developed in Matlab-Simulink. Latest technology of super conducting magnetic energy storage (SMES) devices has also been studied as a supplementary energy source for the system. FLC theory together with the use of SMES units is the focus of our study for improved system dynamic response. Typical frequency and active power responses have been illustrated using the simulation techniques of the Simulink program. Results of FLC including SMES have been compared with the conventional PID controllers and it is proved that the system performance improves significantly.