Step 1

In a large saucepan, cook bacon until crisp; remove to paper towels with a slotted spoon. Drain, reserving 1 tablespoon drippings.

Step 2

Saute onion in drippings until tender. Add water, potatoes, salt and pepper. Bring to a boil. Reduce heat; simmer, uncovered, until potatoes are tender, about 12 minutes.

Step 3

Combine flour and milk until smooth; gradually stir into potato mixture. Bring to a boil; cook and stir until thickened and bubbly, about 2 minutes. Remove from the heat; stir in cheese until melted. Sprinkle with bacon.