Preheat the oven to 350°F and spray a 2-quart baking dish with nonstick cooking spray. Pour the water and salt into a medium pot and heat until boiling. Whisk in the grits, stirring briskly to keep them from clumping. Reduce the heat to a simmer and cook, stirring frequently, for about 10 minutes or until the grits are tender and thick. Stir in the butter and garlic powder.
In a small bowl, whisk the milk and egg together. Stir it into the grits along with the cheeses. Pour the grits into the prepared baking dish and bake for 35 to 40 minutes or until set.
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