Preheat the oven to 350 F. Coat a 9-by-13-inch baking dish with cooking spray.
Bring milk and 2 cups of the heavy cream to a boil in a medium saucepan over medium-high. Stir in grits and butter; let mixture return to a boil, whisking often. Reduce heat to medium; cook, whisking constantly, until grits are tender, 5 to 7 minutes.
Remove from heat; stir in egg, cheese, and season to taste. Spoon mixture into prepared baking dish. Cover; bake until mixture is set, 35 to 40 minutes.
eanwhile, cook bacon in a large saucepan over medium-high, stirring occasionally, until crisp, about 7 minutes. Drain on paper towels, reserving 3 tablespoons of drippings in the pan.
Add onion and bell pepper to the pan. Cook over medium-high, stirring often, until softened, about 3 minutes.