In a small nonstick skillet, cook bacon and onion over medium heat until bacon is crisp. Add potato; heat through. Drain. Remove from skillet and set aside. Remove to paper towels to drain.
In the same skillet, melt butter over medium-high heat. Whisk the eggs, water, salt and pepper. Add egg mixture to skillet (mixture should set immediately at edges).
As eggs set, push cooked edges toward the center, letting uncooked portion flow underneath. When the eggs are set, spoon bacon mixture and potato on one side and sprinkle with cheese; fold other side over filling. Slide omelet onto a plate.