In a small bowl, combine the lukewarm water and active dry yeast. Let it sit for about 5 minutes until frothy.
In a large mixing bowl, whisk together granulated sugar, beaten egg, and evaporated milk. Add the frothy yeast mixture and stir until well blended.
In another bowl, whisk together bread flour and salt. Gradually add to wet ingredients, mixing until a soft dough forms.
Turn dough onto a floured surface and knead for 5-7 minutes until smooth and elastic. Add more flour if sticky.
Place dough in a lightly greased bowl, cover with a towel, and let rise in a warm place for 1-2 hours until doubled in size.
Punch down dough and roll it out on a floured surface to 1/4 inch thickness.
Cut dough into 2 inch squares using a sharp knife or pizza cutter.
Heat vegetable oil in a pot or deep fryer to 350°F (175°C). Use a frying thermometer for accuracy.
Fry dough squares in batches for 2-3 minutes on each side until golden brown. Remove with a slotted spoon to a cooling rack.
While warm, dust beignets generously with powdered sugar. Serve immediately and enjoy!