Baked Grits

3 tablespoons unsalted butter
1/2 yellow onion or 3 green onions, tops included, chopped
1/2 green bell pepper, seeded and chopped
1/2 red bell pepper, seeded and chopped
1 fresh red or green chile, seeded and minced
3 cups water
Dash of salt
1 cup quick-cooking grits
1/4 cup shredded cheddar cheese
1/4 cup milk
Paprika

Preheat oven to 350*F (180*C). Butter an 8-inch square baking dish or8-inch cast iron skillet. In another skillet over medium-high heat, melt the butter. Add the onion, bell peppers, and chile and sauté until just softened, 3 to 4 minutes. Meanwhile, in a saucepan, bring the water to a boil. Add the salt and slowly add the grits, stirring all the while. Cook over medium heat, stirring constantly for 5 to 10 minutes, or longer if you want a finer texture. Stir in the onion mixture, cheese, and milk and mix well. Taste for seasonings. Pour into prepared baking dish. (At this point, the dish may be covered and refrigerated up to overnight.) Sprinkle with paprika and bake until set and just beginning to brown on the top, 25 to 30 minutes. Serve hot. Or let cool completely, slice, and fry in a little oil in a nonstick pan, turning once, until crisp. Serve as a side dish or for breakfast.