Heat a large lidded skillet over medium flame. Add olive oil. When it starts to shimmer, add onion and cook, stirring often, until it just starts to soften, about 3 minutes.
Add potatoes and toss to coat with oil. Cook for 7 or 8 minutes, stirring frequently, until potatoes begin to brown. Add red bell pepper and chorizo and cook for 3 minutes, stirring occasionally.
Add garlic and cook until fragrant, about 45 seconds. Stir in paprika, crushed red pepper flakes and bay leaf. Stir in wine and cook until it is slightly reduced, about 3 minutes.
Add water, turn heat to high to bring to a boil. Water should almost cover potatoes; if not add a little more. When liquid is boiling, reduce heat to low and cook uncovered for 15 minutes, stirring occasionally. Cover pan and cook for another 10 minutes or more, until potatoes are tender.
Discard bay leaf, adjust seasoning with salt and serve in shallow bowls.