Add milk, 1/2 cup of half & half, chili powder, onion powder, nutmeg, and about 2/3 of your shredded cheese. Whisk over low heat until smooth.
1 cup milk, ½ to 1 cup half & half, 1 teaspoon chili powder, ¼ teaspoon nutmeg, 8 ounces sharp cheddar, 8 ounces monterey jack, ½ teaspoon onion powder