Using a mixer with a dough hook, place water, sugar, salt, egg, butter, evaporated milk, flour, and yeast in the bowl.

Beat until smooth. If using a bread machine, select dough setting and press Start. When dough cycle has finished, remove dough from pan and turn out onto a lightly oiled surface. form dough into an oval, place in a lightly greased bowl, cover with plastic wrap, and refrigerate until well chilled (3 to 4 hours) or overnight.

To prepare dough, remove from refrigerator and roll out on a lightly floured board to 1/2-inch thickness. Cut into approximately 3-inch squares.

In a deep fryer or large pot, heat vegetable oil to 360 degrees F. Fry the beignets (2 or 3 at a time) 2 to 3 minutes or until they are puffed and golden brown on both sides, turning them in the oil with tongs once or twice to get them evenly brown; beignets will rise to the surface of the oil as soon as they begin to puff.

NOTE: If the beignets don't rise to the top immediately when dropped into the oil, the oil is not hot enough. Remove from oil and drain on paper towels, then sprinkle heavily with powdered sugar. Serve hot.

NOTE: The dough can be kept for up to a week in the refrigerator - it actually improves with age; just punch down when it rises. Dough can also be frozen; cut and roll, or shape doughnuts before freezing.)

Makes 18 beignets.