PREHEAT oven to 350° F. Grease 11 x 7-inch baking dish.
PLACE potatoes in large saucepan. Cover with water; bring to a boil. Cook over medium-high heat for 3 to 4 minutes; drain. Set aside.
HEAT butter in same saucepan over medium heat. Add onion; cook, stirring occasionally, for 1 to 2 minutes or until onion is tender. Stir in flour, salt and pepper. Gradually stir in evaporated milk and water. Cook, stirring constantly, until mixture comes to a boil. Remove from heat. Arrange potatoes in prepared baking dish; pour milk mixture over potatoes. Sprinkle with cheese.
BAKE for 25 to 30 minutes or until potatoes are tender and cheese is light golden brown.
NOTE: For a twist on the traditional, spice up your Scalloped Potatoes with these tips. Add a combination of chopped ham, red bell pepper and/or diced green chiles to the potatoes prior to baking. Or, add 1 cup (4 ounces) shredded cheddar cheese to the milk mixture after it is removed from the heat and top the dish with additional shredded cheddar cheese in place of Parmesan cheese.