Melt cheese over low heat. Gradually stir in milk and chili powder. Heat sauce, do not boil.
Add red and green peppers, and scallions. Mix sauce well. Hold in bain marie for serving or move to a crock pot, set to low or a fondue pot.
Serve 4 ounces of sauce with 4 ounces tortilla chips. If desired, garnish with cilantro.