Preheat oven to 375°F (190°C) and grease a 9x13-inch baking dish with cooking spray or butter.
Heat olive oil in a large skillet over medium heat.
Add yellow onion and green bell pepper; sauté 5–7 minutes until softened.
Add summer sausage; cook 5 minutes until lightly browned, then remove skillet from heat.
In a medium bowl, whisk condensed cream of mushroom soup, milk, garlic powder, and black pepper until smooth.
Spread diced russet potatoes evenly in the prepared baking dish.
Top potatoes with the sausage, onion, and pepper mixture.
Sprinkle 1.5 cups of shredded sharp cheddar cheese over the top.
Pour the creamy soup mixture evenly over everything.
Cover the dish tightly with foil and bake 45 minutes.
Remove foil; sprinkle remaining 0.5 cup cheese on top.
Bake uncovered 15–20 minutes more until potatoes are tender and cheese is golden and bubbly.
Let rest 5–10 minutes before serving.