GRATE potatoes using large holes of box grater; place in center of large clean kitchen towel. Bring up ends of towel and twist together to form pouch. Hold pouch over sink, then squeeze to remove as much moisture from potatoes as possible. Empty potatoes into large bowl. Add egg, flour and pepper; mix well.
HEAT oil in large nonstick skillet on medium-high heat. Spoon potato mixture into 8 mounds, about 2 inches apart, in skillet, using about 1 Tbsp. potato mixture for each pancake. Press lightly with back of spoon to flatten. Cook 3 to 4 min. on each side or until pancakes are golden brown on both sides. Remove from skillet; drain on paper towels.
SERVE warm topped with remaining ingredients.