In a blender, combine 2/3 cup granulated white sugarand 1 cup dry milk powder. Pulse briefly to mix.
In a microwave-safe jug or bowl, combine the 1 teaspoon vanilla extract, 3 tablespoons butter and 1/3 cup water and heat until it boils (you can use a saucepan if you need to, just keep an eye on it). You could also use melted butter and boiling water.
Pour the vanilla & butter mixture into the blender and pulse it for a few minutes, until thickened. (It will thicken up more as it cools, so don't get hung up on the texture at this point).
Pour into a storage container or jar and allow to cool to room temperature before using.
Storing
Store in the fridge and use as regular condensed milk.
Notes
The yield in this recipe is about 10 servings, similar to the canned version.