2 c. water
2 c. red potatoes, peeled and cut into cubes
3 tbsp. butter
1 small onion, finely chopped
3 tbsp. flour
red and black pepper to taste
3 c. milk
1/2 tsp. sugar
1 c. shredded Cheddar cheese
1 c. cooked ham, cubed

Bring water to boil in large saucepan; add potatoes and cook until tender. Drain, reserving liquid. Measure 1 cup of reserved liquid, adding water if necessary; set aside. Melt butter in saucepan over medium heat; add onion and cook until tender, but not brown, stirring often. Add flour; season with pepper. Cook 3 to 4 minutes. Gradually add potatoes, reserved liquid, milk and sugar to onion mixture; stir well. Add cheese and ham. Simmer over low heat 30 minutes, stirring frequently.