To the large bowl of a stand mixer add water, 1 tsp granulated sugar and yeast to the bowl of a stand mixer. Gently stir using the paddle attachment just until the yeast has dissolved. Allow to sit and bloom for 8-10 minutes. The top should look foamy and creamy.
Meanwhile, in a separate small bowl whisk together the remaining 1/2 cup sugar, buttermilk, shortening, vanilla and egg until fully combined.
In a third medium bowl use a whisk to sift together flour, baking powder and salt. Set aside.
After the yeast has bloomed, add the buttermilk mixture to the stand mixer bowl. Mix just until combined using the paddle attachment.
Switch to the dough hook. To the bowl gradually add the dry ingredients with the mixer on low speed. Stop and scrape the sides of the bowl as needed.
Once the dough begins to comes together knead using the dough hook for about 5 minutes or until the dough isn't sticky. (You can also do this by hand on a non-stick surface.)
Form into a round and place into a bowl oiled with a small amount of vegetable or canola oil. Turn dough to coat. Cover with plastic wrap and allow to rise in the fridge for at least 4 hours or overnight.
To Fry: Heat 4 inches of oil in a Dutch oven or deep pot fitted with a fry thermometer to 350-360°F.
Remove dough from refrigerator. Turn the dough out onto a lightly floured surface. Roll the dough into a 1/4 inch thick rectangle. Use a pizza cutter or sharp knife to cut into 2-inch squares.
Cook pieces of dough in batches carefully lowering each beignet into the hot oil. Cook until puffed and golden brown, around 2 minutes on each side. Maintain and monitor the temperature of the oil while cooking.
Use a slotted spoon or stainless steel spider to remove from hot oil to a large paper bag filled with 1 cup of powdered sugar. Close the top and shake vigorously to coat. Add more powdered sugar to the bag as needed.
Transfer to a cooling rack or platter and serve immediately.
Special Note: You can allow the dough to rise in a warm place at room temperature covered with a damp cloth for 2 hours, if you want to fry them immediately.