Grate cheese. You should have two cups of cheddar. You don’t want to use pre-grated cheese if you want a really creamy dip. The pre-grated stuff doesn’t melt as nicely. Melt butter in a saucepan. Whisk in flour and cook for two minutes, until bubbling. Turn heat up and whisk in milk. Bring to a simmer, then remove from heat and slowly whisk in cheese, handful by handful, until fully incorporated. Whisk in salt and chili powder. Serve immediately.