Preheat oven to 350 degrees F.
Heat a nonstick skillet with the canola oil over low heat, add the onions and cook until well caramelized. Lightly spray a shallow casserole dish with cooking spray. Layer half of the sliced potatoes onto the bottom of the casserole dish. Spread half the caramelized onions over the first layer of potatoes, and top with half the shredded cheese. Repeat with a second layer of potatoes, onions and cheese.
Heat the milk and butter in a small saucepan until the butter is melted. Pour the milk mixture over the potatoes and top with about 4 grinds of freshly grated nutmeg. Bake until potatoes are tender and casserole is bubbly, about 45 minutes. Remove and allow to cool slightly. Serve warm.