Heat the water and milk to a boil. Turn down to medium and add the grits and salt and pepper. Stir the grits about 10-12 minutes until they start to thicken and bubble. Add in the green chiles, cheddar cheese, garlic powder and Velvetta cheese.

Mix the eggs in a measuring cup and add enough milk to measure 1 cup.

Use the stick of butter first to butter your baking dish and then put the remainder into the cooking grits.

Stir in the egg/milk mixture very slowly to keep the eggs from cooking. Cook for another 5 minutes. Add in your fried and finely chopped bacon. Pour mixture into your buttered baking dish and bake in 325° oven for about an hour or until browned and set. It make take up to 1:15. Sometimes I turn mine up to 350° towards the end. If they start to brown too much, spray some foil with cooking spray and cover top of grits loosely.